Correlation Between DXP Enterprises and WW Grainger
Can any of the company-specific risk be diversified away by investing in both DXP Enterprises 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 DXP Enterprises and WW Grainger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXP Enterprises and WW Grainger, you can compare the effects of market volatilities on DXP Enterprises 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 DXP Enterprises with a short position of WW Grainger. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and WW Grainger.
Diversification Opportunities for DXP Enterprises and WW Grainger
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DXP and GWW is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger 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 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 DXP Enterprises i.e., DXP Enterprises and WW Grainger go up and down completely randomly.
Pair Corralation between DXP Enterprises and WW Grainger
Given the investment horizon of 90 days DXP Enterprises is expected to generate 2.97 times more return on investment than WW Grainger. However, DXP Enterprises is 2.97 times more volatile than WW Grainger. It trades about 0.37 of its potential returns per unit of risk. WW Grainger is currently generating about 0.26 per unit of risk. If you would invest 4,937 in DXP Enterprises on August 27, 2024 and sell it today you would earn a total of 2,196 from holding DXP Enterprises or generate 44.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DXP Enterprises vs. WW Grainger
Performance |
| Timeline |
| DXP Enterprises |
| WW Grainger |
DXP Enterprises and WW Grainger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXP Enterprises and WW Grainger
The main advantage of trading using opposite DXP Enterprises and WW Grainger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises 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.| DXP Enterprises vs. Global Industrial Co | DXP Enterprises vs. BlueLinx Holdings | DXP Enterprises vs. WESCO International | DXP Enterprises vs. MSC Industrial Direct |
| WW Grainger vs. Watsco Inc | WW Grainger vs. Pool Corporation | WW Grainger vs. MSC Industrial Direct | WW Grainger vs. Applied Industrial Technologies |
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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