Correlation Between BRIT AMER and WW Grainger
Can any of the company-specific risk be diversified away by investing in both BRIT AMER and WW Grainger 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 BRIT AMER and WW Grainger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRIT AMER TOBACCO and WW Grainger, you can compare the effects of market volatilities on BRIT AMER and WW Grainger 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 BRIT AMER with a short position of WW Grainger. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRIT AMER and WW Grainger.
Diversification Opportunities for BRIT AMER and WW Grainger
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between BRIT and GWW is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding BRIT AMER TOBACCO and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger and BRIT AMER 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 BRIT AMER TOBACCO are associated (or correlated) with WW Grainger. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WW Grainger has no effect on the direction of BRIT AMER i.e., BRIT AMER and WW Grainger go up and down completely randomly.
Pair Corralation between BRIT AMER and WW Grainger
Assuming the 90 days trading horizon BRIT AMER is expected to generate 2.01 times less return on investment than WW Grainger. But when comparing it to its historical volatility, BRIT AMER TOBACCO is 1.3 times less risky than WW Grainger. It trades about 0.07 of its potential returns per unit of risk. WW Grainger is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 64,252 in WW Grainger on September 1, 2024 and sell it today you would earn a total of 49,998 from holding WW Grainger or generate 77.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.74% |
| Values | Daily Returns |
BRIT AMER TOBACCO vs. WW Grainger
Performance |
| Timeline |
| BRIT AMER TOBACCO |
| WW Grainger |
BRIT AMER and WW Grainger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRIT AMER and WW Grainger
The main advantage of trading using opposite BRIT AMER and WW Grainger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRIT AMER position performs unexpectedly, WW Grainger 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 WW Grainger will offset losses from the drop in WW Grainger's long position.| BRIT AMER vs. Enter Air SA | BRIT AMER vs. International Consolidated Airlines | BRIT AMER vs. FORWARD AIR P | BRIT AMER vs. Norwegian Air Shuttle |
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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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