Correlation Between Middleby Corp and Graco

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

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

Diversification Opportunities for Middleby Corp and Graco

0.57

Correlation Coefficient

Middleby Corp  Graco

Very weak diversification

The 3 months correlation between Middleby and Graco is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Middleby Corp and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and Middleby 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 Middleby 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 Middleby Corp i.e., Middleby Corp and Graco go up and down completely randomly.

Pair Corralation between Middleby Corp and Graco

Given the investment horizon of 90 days Middleby Corp is expected to generate 6.39 times less return on investment than Graco. In addition to that, Middleby Corp is 1.21 times more volatile than Graco Inc. It trades about 0.01 of its total potential returns per unit of risk. Graco Inc is currently generating about 0.04 per unit of volatility. If you would invest  6,522  in Graco Inc on September 26, 2024 and sell it today you would earn a total of  1,944  from holding Graco Inc or generate 29.81% return on investment over 90 days.

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

Middleby Corp  vs.  Graco Inc

Middleby Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Middleby Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Middleby Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Graco Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Middleby Corp and Graco

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

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.