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
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Applied and Global is -0.25. 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 0.65 times more return on investment than Global Industrial. However, Applied Industrial Technologies is 1.54 times less risky than Global Industrial. It trades about 0.25 of its potential returns per unit of risk. Global Industrial Co is currently generating about -0.03 per unit of risk. If you would invest 24,345 in Applied Industrial Technologies on October 20, 2024 and sell it today you would earn a total of 1,394 from holding Applied Industrial Technologies or generate 5.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Industrial Technologie vs. Global Industrial Co
Performance |
| Timeline |
| Applied Industrial |
| Global Industrial |
Applied Industrial and Global Industrial Volatility Contrast
Predicted Return Density |
| Returns |
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.| Applied Industrial vs. Core Main | Applied Industrial vs. WW Grainger | Applied Industrial vs. DXP Enterprises | Applied Industrial vs. SiteOne Landscape Supply |
| Global Industrial vs. Distribution Solutions Group | Global Industrial vs. Core Main | Global Industrial vs. Applied Industrial Technologies | Global Industrial vs. BlueLinx Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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