Correlation Between Applied Industrial and WESCO International
Can any of the company-specific risk be diversified away by investing in both Applied Industrial and WESCO International 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 WESCO International 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 WESCO International, you can compare the effects of market volatilities on Applied Industrial and WESCO International 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 WESCO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Industrial and WESCO International.
Diversification Opportunities for Applied Industrial and WESCO International
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Applied and WESCO is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and WESCO International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESCO International 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 WESCO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESCO International has no effect on the direction of Applied Industrial i.e., Applied Industrial and WESCO International go up and down completely randomly.
Pair Corralation between Applied Industrial and WESCO International
Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 7.97 times more return on investment than WESCO International. However, Applied Industrial is 7.97 times more volatile than WESCO International. It trades about 0.14 of its potential returns per unit of risk. WESCO International is currently generating about 0.13 per unit of risk. If you would invest 15,668 in Applied Industrial Technologies on August 24, 2024 and sell it today you would earn a total of 11,880 from holding Applied Industrial Technologies or generate 75.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Industrial Technologie vs. WESCO International
Performance |
| Timeline |
| Applied Industrial |
| WESCO International |
Applied Industrial and WESCO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Industrial and WESCO International
The main advantage of trading using opposite Applied Industrial and WESCO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Industrial position performs unexpectedly, WESCO International 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 WESCO International will offset losses from the drop in WESCO International's long position.| Applied Industrial vs. Core Main | Applied Industrial vs. WW Grainger | Applied Industrial vs. DXP Enterprises | Applied Industrial vs. SiteOne Landscape Supply |
| WESCO International vs. SiriusPoint | WESCO International vs. Argo Group International | WESCO International vs. Global Ship Lease | WESCO International vs. Compass Diversified |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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