Correlation Between WW Grainger and Watsco
Can any of the company-specific risk be diversified away by investing in both WW Grainger and Watsco 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 WW Grainger and Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW Grainger and Watsco Inc, you can compare the effects of market volatilities on WW Grainger and Watsco 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 WW Grainger with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and Watsco.
Diversification Opportunities for WW Grainger and Watsco
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between GWW and Watsco is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc and WW Grainger 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 WW Grainger are associated (or correlated) with Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of WW Grainger i.e., WW Grainger and Watsco go up and down completely randomly.
Pair Corralation between WW Grainger and Watsco
Assuming the 90 days horizon WW Grainger is expected to generate 0.88 times more return on investment than Watsco. However, WW Grainger is 1.14 times less risky than Watsco. It trades about 0.12 of its potential returns per unit of risk. Watsco Inc is currently generating about 0.05 per unit of risk. If you would invest 92,267 in WW Grainger on September 26, 2024 and sell it today you would earn a total of 11,183 from holding WW Grainger or generate 12.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
WW Grainger vs. Watsco Inc
Performance |
Timeline |
WW Grainger |
Watsco Inc |
WW Grainger and Watsco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with WW Grainger and Watsco
The main advantage of trading using opposite WW Grainger and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger position performs unexpectedly, Watsco 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 Watsco will offset losses from the drop in Watsco's long position.WW Grainger vs. Fastenal Company | WW Grainger vs. Watsco Inc | WW Grainger vs. WATSCO INC B | WW Grainger vs. RATIONAL UNADR 1 |
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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 Stocks Directory module to find actively traded stocks across global markets.
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