Correlation Between Dover and Graco

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

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

Diversification Opportunities for Dover and Graco

0.84

Correlation Coefficient

Dover  Graco

Very poor diversification

The 3 months correlation between Dover and Graco is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dover and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and Dover 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 Dover 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 Dover i.e., Dover and Graco go up and down completely randomly.

Pair Corralation between Dover and Graco

Considering the 90-day investment horizon Dover is expected to generate 1.17 times more return on investment than Graco. However, Dover is 1.17 times more volatile than Graco Inc. It trades about 0.12 of its potential returns per unit of risk. Graco Inc is currently generating about 0.12 per unit of risk. If you would invest  18,603  in Dover on August 30, 2024 and sell it today you would earn a total of  2,048  from holding Dover or generate 11.01% return on investment over 90 days.

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

Dover  vs.  Graco Inc

Dover

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dover are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dover may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Graco Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 9 (%) 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 Dover and Graco

The main advantage of trading using opposite Dover and Graco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dover 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 Dover 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.