Correlation Between Graham and Mueller Water
Can any of the company-specific risk be diversified away by investing in both Graham and Mueller Water 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 Mueller Water into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Graham and Mueller Water Products, you can compare the effects of market volatilities on Graham and Mueller Water 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 Mueller Water. Check out your portfolio center. Please also check ongoing floating volatility patterns of Graham and Mueller Water.
Diversification Opportunities for Graham and Mueller Water
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Graham and Mueller is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Graham and Mueller Water Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mueller Water Products 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 Mueller Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mueller Water Products has no effect on the direction of Graham i.e., Graham and Mueller Water go up and down completely randomly.
Pair Corralation between Graham and Mueller Water
Considering the 90-day investment horizon Graham is expected to generate 1.5 times more return on investment than Mueller Water. However, Graham is 1.5 times more volatile than Mueller Water Products. It trades about 0.12 of its potential returns per unit of risk. Mueller Water Products is currently generating about 0.1 per unit of risk. If you would invest 990.00 in Graham on August 24, 2024 and sell it today you would earn a total of 3,345 from holding Graham or generate 337.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Graham vs. Mueller Water Products
Performance |
| Timeline |
| Graham |
| Mueller Water Products |
Graham and Mueller Water Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Graham and Mueller Water
The main advantage of trading using opposite Graham and Mueller Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Graham position performs unexpectedly, Mueller Water 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 Mueller Water will offset losses from the drop in Mueller Water's long position.| Graham vs. Luxfer Holdings PLC | Graham vs. Enerpac Tool Group | Graham vs. Kadant Inc | Graham vs. Omega Flex |
| Mueller Water vs. Enerpac Tool Group | Mueller Water vs. Luxfer Holdings PLC | Mueller Water vs. John Bean Technologies | Mueller Water vs. CSW Industrials |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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