Correlation Between DXP Enterprises and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both DXP Enterprises and Applied 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 DXP Enterprises and Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXP Enterprises and Applied Industrial Technologies, you can compare the effects of market volatilities on DXP Enterprises and Applied 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 DXP Enterprises with a short position of Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and Applied Industrial.
Diversification Opportunities for DXP Enterprises and Applied Industrial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between DXP and Applied is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and Applied Industrial go up and down completely randomly.
Pair Corralation between DXP Enterprises and Applied Industrial
Given the investment horizon of 90 days DXP Enterprises is expected to generate 1.5 times more return on investment than Applied Industrial. However, DXP Enterprises is 1.5 times more volatile than Applied Industrial Technologies. It trades about 0.09 of its potential returns per unit of risk. Applied Industrial Technologies is currently generating about 0.09 per unit of risk. If you would invest 2,654 in DXP Enterprises on August 23, 2024 and sell it today you would earn a total of 4,258 from holding DXP Enterprises or generate 160.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
DXP Enterprises vs. Applied Industrial Technologie
Performance |
| Timeline |
| DXP Enterprises |
| Applied Industrial |
DXP Enterprises and Applied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXP Enterprises and Applied Industrial
The main advantage of trading using opposite DXP Enterprises and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises position performs unexpectedly, Applied 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.| DXP Enterprises vs. Global Industrial Co | DXP Enterprises vs. EVI Industries | DXP Enterprises vs. Core Main | DXP Enterprises vs. Watsco Inc |
| Applied Industrial vs. Core Main | Applied Industrial vs. WW Grainger | Applied Industrial vs. DXP Enterprises | Applied Industrial vs. SiteOne Landscape Supply |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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