Correlation Between Global Industrial and Transcat

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

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

Diversification Opportunities for Global Industrial and Transcat

0.87

Correlation Coefficient

Global Industrial  Transcat

Very poor diversification

The 3 months correlation between Global and Transcat is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co and Transcat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcat and Global 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 Global Industrial Co are associated (or correlated) with Transcat. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcat has no effect on the direction of Global Industrial i.e., Global Industrial and Transcat go up and down completely randomly.

Pair Corralation between Global Industrial and Transcat

Considering the 90-day investment horizon Global Industrial Co is expected to generate 1.16 times more return on investment than Transcat. However, Global Industrial is 1.16 times more volatile than Transcat. It trades about -0.11 of its potential returns per unit of risk. Transcat is currently generating about -0.14 per unit of risk. If you would invest  3,310  in Global Industrial Co on August 16, 2024 and sell it today you would lose (481.00) from holding Global Industrial Co or give up 14.53% of portfolio value over 90 days.

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

Global Industrial Co  vs.  Transcat

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 latest weak performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Transcat

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Transcat has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Global Industrial and Transcat

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

The idea behind Global Industrial Co and Transcat 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.