Correlation Between Graco and Smith AO
Can any of the company-specific risk be diversified away by investing in both Graco and Smith AO 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 Graco and Smith AO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graco Inc and Smith AO, you can compare the effects of market volatilities on Graco and Smith AO 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 Graco with a short position of Smith AO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graco and Smith AO.
Diversification Opportunities for Graco and Smith AO
Modest diversification
The 3 months correlation between Graco and Smith is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Smith AO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smith AO and Graco 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 Graco Inc are associated (or correlated) with Smith AO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smith AO has no effect on the direction of Graco i.e., Graco and Smith AO go up and down completely randomly.
Pair Corralation between Graco and Smith AO
Considering the 90-day investment horizon Graco Inc is expected to generate 0.75 times more return on investment than Smith AO. However, Graco Inc is 1.34 times less risky than Smith AO. It trades about 0.01 of its potential returns per unit of risk. Smith AO is currently generating about -0.08 per unit of risk. If you would invest 8,402 in Graco Inc on November 1, 2024 and sell it today you would earn a total of 13.00 from holding Graco Inc or generate 0.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graco Inc vs. Smith AO
Performance |
| Timeline |
| Graco Inc |
| Smith AO |
Graco and Smith AO Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graco and Smith AO
The main advantage of trading using opposite Graco and Smith AO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graco position performs unexpectedly, Smith AO 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 Smith AO will offset losses from the drop in Smith AO's long position.The idea behind Graco Inc and Smith AO pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Smith AO vs. Dover | Smith AO vs. Illinois Tool Works | Smith AO vs. Xylem Inc | Smith AO vs. Franklin Electric Co |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |