Correlation Between WW Grainger and Global Industrial

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

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

Diversification Opportunities for WW Grainger and Global Industrial

-0.59

Correlation Coefficient

WW Grainger  Global Industrial

Excellent diversification

The 3 months correlation between GWW and Global is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Global Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Industrial 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 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 WW Grainger i.e., WW Grainger and Global Industrial go up and down completely randomly.

Pair Corralation between WW Grainger and Global Industrial

Considering the 90-day investment horizon WW Grainger is expected to generate 0.33 times more return on investment than Global Industrial. However, WW Grainger is 3.03 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  108,906  in WW Grainger on August 26, 2024 and sell it today you would earn a total of  11,759  from holding WW Grainger or generate 10.8% return on investment over 90 days.

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

WW Grainger  vs.  Global Industrial Co

WW Grainger

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, WW Grainger showed 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 WW Grainger and Global Industrial

The main advantage of trading using opposite WW Grainger and Global Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger 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 WW Grainger 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.