Correlation Between WW Grainger and Associated British
Can any of the company-specific risk be diversified away by investing in both WW Grainger and Associated British 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 Associated British into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW Grainger and Associated British Foods, you can compare the effects of market volatilities on WW Grainger and Associated British 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 Associated British. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and Associated British.
Diversification Opportunities for WW Grainger and Associated British
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between 0IZI and Associated is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Associated British Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated British Foods 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 Associated British. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated British Foods has no effect on the direction of WW Grainger i.e., WW Grainger and Associated British go up and down completely randomly.
Pair Corralation between WW Grainger and Associated British
Assuming the 90 days trading horizon WW Grainger is expected to under-perform the Associated British. But the stock apears to be less risky and, when comparing its historical volatility, WW Grainger is 1.05 times less risky than Associated British. The stock trades about -0.22 of its potential returns per unit of risk. The Associated British Foods is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 225,400 in Associated British Foods on September 12, 2024 and sell it today you would lose (6,200) from holding Associated British Foods or give up 2.75% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
WW Grainger vs. Associated British Foods
Performance |
| Timeline |
| WW Grainger |
| Associated British Foods |
WW Grainger and Associated British Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WW Grainger and Associated British
The main advantage of trading using opposite WW Grainger and Associated British positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger position performs unexpectedly, Associated British 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 Associated British will offset losses from the drop in Associated British's long position.| WW Grainger vs. Vitec Software Group | WW Grainger vs. Associated British Foods | WW Grainger vs. International Biotechnology Trust | WW Grainger vs. Ashtead Technology Holdings |
| Associated British vs. Inspiration Healthcare Group | Associated British vs. Universal Health Services | Associated British vs. Naturhouse Health SA | Associated British vs. Gamma Communications PLC |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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