Correlation Between Graham and Gates Industrial
Can any of the company-specific risk be diversified away by investing in both Graham and Gates Industrial 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 Graham and Gates Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graham and Gates Industrial, you can compare the effects of market volatilities on Graham and Gates Industrial 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 Graham with a short position of Gates Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Gates Industrial.
Diversification Opportunities for Graham and Gates Industrial
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Graham and Gates is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Gates Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gates Industrial and Graham 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 Graham are associated (or correlated) with Gates Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gates Industrial has no effect on the direction of Graham i.e., Graham and Gates Industrial go up and down completely randomly.
Pair Corralation between Graham and Gates Industrial
Considering the 90-day investment horizon Graham is expected to generate 1.65 times more return on investment than Gates Industrial. However, Graham is 1.65 times more volatile than Gates Industrial. It trades about 0.16 of its potential returns per unit of risk. Gates Industrial is currently generating about 0.14 per unit of risk. If you would invest 2,622 in Graham on September 3, 2024 and sell it today you would earn a total of 1,860 from holding Graham or generate 70.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graham vs. Gates Industrial
Performance |
| Timeline |
| Graham |
| Gates Industrial |
Graham and Gates Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham and Gates Industrial
The main advantage of trading using opposite Graham and Gates Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham position performs unexpectedly, Gates Industrial 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 Gates Industrial will offset losses from the drop in Gates Industrial's long position.| Graham vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
| Gates Industrial vs. Crane NXT Co | Gates Industrial vs. Donaldson | Gates Industrial vs. ITT Inc | Gates Industrial 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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