Correlation Between Applied Industrial and Now

Can any of the company-specific risk be diversified away by investing in both Applied Industrial and Now 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 Applied Industrial and Now into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Applied Industrial Technologies and Now Inc, you can compare the effects of market volatilities on Applied Industrial and Now 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 Applied Industrial with a short position of Now. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Industrial and Now.

Diversification Opportunities for Applied Industrial and Now

0.9

Correlation Coefficient

Applied Industrial  Now

Almost no diversification

The 3 months correlation between Applied and Now is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc and Applied Industrial 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 Applied Industrial Technologies are associated (or correlated) with Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of Applied Industrial i.e., Applied Industrial and Now go up and down completely randomly.

Pair Corralation between Applied Industrial and Now

Considering the 90-day investment horizon Applied Industrial Technologies is expected to under-perform the Now. In addition to that, Applied Industrial is 1.06 times more volatile than Now Inc. It trades about -0.06 of its total potential returns per unit of risk. Now Inc is currently generating about 0.02 per unit of volatility. If you would invest  1,484  in Now Inc on September 12, 2024 and sell it today you would earn a total of  4.00  from holding Now Inc or generate 0.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Applied Industrial Technologie  vs.  Now Inc

Applied Industrial

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Industrial Technologies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Applied Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Now Inc

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Now Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Now showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Applied Industrial and Now

The main advantage of trading using opposite Applied Industrial and Now positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Industrial position performs unexpectedly, Now 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 Now will offset losses from the drop in Now's long position.

The idea behind Applied Industrial Technologies and Now 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.