Correlation Between Applied Industrial and Global Industrial

Can any of the company-specific risk be diversified away by investing in both Applied Industrial and Global Industrial 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 Global Industrial 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 Global Industrial Co, you can compare the effects of market volatilities on Applied Industrial and Global Industrial 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 Global Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Industrial and Global Industrial.

Diversification Opportunities for Applied Industrial and Global Industrial

-0.62

Correlation Coefficient

Applied Industrial  Global Industrial

Excellent diversification

The 3 months correlation between Applied and Global is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and Global Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Industrial 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 Global Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Industrial has no effect on the direction of Applied Industrial i.e., Applied Industrial and Global Industrial go up and down completely randomly.

Pair Corralation between Applied Industrial and Global Industrial

Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 0.61 times more return on investment than Global Industrial. However, Applied Industrial Technologies is 1.65 times less risky than Global Industrial. It trades about 0.28 of its potential returns per unit of risk. Global Industrial Co is currently generating about -0.13 per unit of risk. If you would invest  23,098  in Applied Industrial Technologies on August 26, 2024 and sell it today you would earn a total of  4,613  from holding Applied Industrial Technologies or generate 19.97% return on investment over 90 days.

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

Applied Industrial Technologie  vs.  Global Industrial Co

Applied Industrial

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Applied Industrial Technologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward indicators, Applied Industrial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Global Industrial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain rather sound which may send shares a bit higher in December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Applied Industrial and Global Industrial

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

The idea behind Applied Industrial Technologies and Global Industrial Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.