Correlation Between Timken and Graco

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

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

Diversification Opportunities for Timken and Graco

0.74

Correlation Coefficient

Timken  Graco

Poor diversification

The 3 months correlation between Timken and Graco is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and Timken 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 Timken Company 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 Timken i.e., Timken and Graco go up and down completely randomly.

Pair Corralation between Timken and Graco

Considering the 90-day investment horizon Timken Company is expected to generate 1.71 times more return on investment than Graco. However, Timken is 1.71 times more volatile than Graco Inc. It trades about 0.1 of its potential returns per unit of risk. Graco Inc is currently generating about 0.03 per unit of risk. If you would invest  6,595  in Timken Company on May 6, 2025 and sell it today you would earn a total of  755.00  from holding Timken Company or generate 11.45% return on investment over 90 days.

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

Timken Company  vs.  Graco Inc

Timken Company

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Timken Company are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating forward-looking signals, Timken may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Graco Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Graco Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Timken and Graco

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.