Correlation Between GrafTech International and Powell Industries
Can any of the company-specific risk be diversified away by investing in both GrafTech International and Powell Industries 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 GrafTech International and Powell Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GrafTech International and Powell Industries, you can compare the effects of market volatilities on GrafTech International and Powell Industries 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 GrafTech International with a short position of Powell Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of GrafTech International and Powell Industries.
Diversification Opportunities for GrafTech International and Powell Industries
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between GrafTech and Powell is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding GrafTech International and Powell Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powell Industries and GrafTech International 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 GrafTech International are associated (or correlated) with Powell Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powell Industries has no effect on the direction of GrafTech International i.e., GrafTech International and Powell Industries go up and down completely randomly.
Pair Corralation between GrafTech International and Powell Industries
Considering the 90-day investment horizon GrafTech International is expected to generate 7.34 times less return on investment than Powell Industries. But when comparing it to its historical volatility, GrafTech International is 1.4 times less risky than Powell Industries. It trades about 0.02 of its potential returns per unit of risk. Powell Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 25,922 in Powell Industries on August 27, 2024 and sell it today you would earn a total of 3,066 from holding Powell Industries or generate 11.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
GrafTech International vs. Powell Industries
Performance |
| Timeline |
| GrafTech International |
| Powell Industries |
GrafTech International and Powell Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GrafTech International and Powell Industries
The main advantage of trading using opposite GrafTech International and Powell Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrafTech International position performs unexpectedly, Powell Industries 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 Powell Industries will offset losses from the drop in Powell Industries' long position.| GrafTech International vs. Kimball Electronics | GrafTech International vs. Hayward Holdings | GrafTech International vs. Enersys | GrafTech International vs. Espey Mfg Electronics |
| Powell Industries vs. Kimball Electronics | Powell Industries vs. Hayward Holdings | Powell Industries vs. nVent Electric PLC | Powell Industries vs. Energizer 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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