Correlation Between Fastenal and WW Grainger
Can any of the company-specific risk be diversified away by investing in both Fastenal 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 Fastenal and WW Grainger into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fastenal Company and WW Grainger, you can compare the effects of market volatilities on Fastenal 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 Fastenal with a short position of WW Grainger. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fastenal and WW Grainger.
Diversification Opportunities for Fastenal and WW Grainger
0.99 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Fastenal and GWW is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and WW Grainger in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WW Grainger and Fastenal 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 Fastenal Company 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 Fastenal i.e., Fastenal and WW Grainger go up and down completely randomly.
Pair Corralation between Fastenal and WW Grainger
Given the investment horizon of 90 days Fastenal is expected to generate 1.32 times less return on investment than WW Grainger. But when comparing it to its historical volatility, Fastenal Company is 1.06 times less risky than WW Grainger. It trades about 0.09 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 56,981 in WW Grainger on August 27, 2024 and sell it today you would earn a total of 63,684 from holding WW Grainger or generate 111.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fastenal Company vs. WW Grainger
Performance |
| Timeline |
| Fastenal |
| WW Grainger |
Fastenal and WW Grainger Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fastenal and WW Grainger
The main advantage of trading using opposite Fastenal and WW Grainger positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastenal 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.| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal vs. Watsco Inc |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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