Correlation Between SMC Corp and Graco

Can any of the company-specific risk be diversified away by investing in both SMC Corp and Graco at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SMC Corp and Graco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SMC Corp and Graco Inc, you can compare the effects of market volatilities on SMC Corp and Graco and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SMC Corp with a short position of Graco. Check out your portfolio center. Please also check ongoing floating volatility patterns of SMC Corp and Graco.

Diversification Opportunities for SMC Corp and Graco

0.32

Correlation Coefficient

SMC Corp  Graco

Weak diversification

The 3 months correlation between SMC and Graco is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding SMC Corp and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and SMC Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SMC Corp are associated (or correlated) with Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of SMC Corp i.e., SMC Corp and Graco go up and down completely randomly.

Pair Corralation between SMC Corp and Graco

Assuming the 90 days horizon SMC Corp is expected to under-perform the Graco. In addition to that, SMC Corp is 1.1 times more volatile than Graco Inc. It trades about -0.06 of its total potential returns per unit of risk. Graco Inc is currently generating about 0.32 per unit of volatility. If you would invest  8,161  in Graco Inc on August 31, 2024 and sell it today you would earn a total of  895.00  from holding Graco Inc or generate 10.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

SMC Corp  vs.  Graco Inc

SMC Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMC Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, SMC Corp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Graco Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical and fundamental indicators, Graco may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with SMC Corp and Graco

The main advantage of trading using opposite SMC Corp and Graco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SMC Corp position performs unexpectedly, Graco can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Graco will offset losses from the drop in Graco's long position.

The idea behind SMC Corp and Graco Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.