Correlation Between Graco and Generac Holdings
Can any of the company-specific risk be diversified away by investing in both Graco and Generac Holdings 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 Generac Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graco Inc and Generac Holdings, you can compare the effects of market volatilities on Graco and Generac Holdings 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 Generac Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graco and Generac Holdings.
Diversification Opportunities for Graco and Generac Holdings
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Graco and Generac is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Generac Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generac Holdings 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 Generac Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generac Holdings has no effect on the direction of Graco i.e., Graco and Generac Holdings go up and down completely randomly.
Pair Corralation between Graco and Generac Holdings
Considering the 90-day investment horizon Graco is expected to generate 1.29 times less return on investment than Generac Holdings. But when comparing it to its historical volatility, Graco Inc is 1.38 times less risky than Generac Holdings. It trades about 0.25 of its potential returns per unit of risk. Generac Holdings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 16,618 in Generac Holdings on August 24, 2024 and sell it today you would earn a total of 1,734 from holding Generac Holdings or generate 10.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graco Inc vs. Generac Holdings
Performance |
| Timeline |
| Graco Inc |
| Generac Holdings |
Graco and Generac Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graco and Generac Holdings
The main advantage of trading using opposite Graco and Generac Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graco position performs unexpectedly, Generac Holdings 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 Generac Holdings will offset losses from the drop in Generac Holdings' long position.The idea behind Graco Inc and Generac Holdings 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.| Generac Holdings vs. Illinois Tool Works | Generac Holdings vs. Small Cap Core | Generac Holdings vs. Freedom Holding Corp | Generac Holdings vs. Gfl Environmental 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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