Correlation Between WATSCO INC and WW Grainger
Can any of the company-specific risk be diversified away by investing in both WATSCO INC and WW Grainger 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 WATSCO INC and WW Grainger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WATSCO INC B and WW Grainger, you can compare the effects of market volatilities on WATSCO INC and WW Grainger 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 WATSCO INC with a short position of WW Grainger. Check out your portfolio center. Please also check ongoing floating volatility patterns of WATSCO INC and WW Grainger.
Diversification Opportunities for WATSCO INC and WW Grainger
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between WATSCO and GWW is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding WATSCO INC B and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger and WATSCO INC 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 WATSCO INC B are associated (or correlated) with WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of WATSCO INC i.e., WATSCO INC and WW Grainger go up and down completely randomly.
Pair Corralation between WATSCO INC and WW Grainger
Assuming the 90 days trading horizon WATSCO INC B is expected to under-perform the WW Grainger. But the stock apears to be less risky and, when comparing its historical volatility, WATSCO INC B is 1.13 times less risky than WW Grainger. The stock trades about -0.01 of its potential returns per unit of risk. The WW Grainger is currently generating about 0.12 of returns per unit of risk over similar time horizon. 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 Against |
Strength | Very Weak |
Accuracy | 98.44% |
Values | Daily Returns |
WATSCO INC B vs. WW Grainger
Performance |
Timeline |
WATSCO INC B |
WW Grainger |
WATSCO INC and WW Grainger Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with WATSCO INC and WW Grainger
The main advantage of trading using opposite WATSCO INC and WW Grainger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WATSCO INC position performs unexpectedly, WW Grainger 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 WW Grainger will offset losses from the drop in WW Grainger's long position.WATSCO INC vs. WW Grainger | WATSCO INC vs. Fastenal Company | WATSCO INC vs. Watsco Inc | WATSCO INC vs. RATIONAL UNADR 1 |
WW Grainger vs. Fastenal Company | WW Grainger vs. Watsco Inc | WW Grainger vs. WATSCO INC B | WW Grainger vs. RATIONAL UNADR 1 |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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