Correlation Between Global Industrial and Distribution Solutions
Can any of the company-specific risk be diversified away by investing in both Global Industrial and Distribution Solutions 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 Global Industrial and Distribution Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Industrial Co and Distribution Solutions Group, you can compare the effects of market volatilities on Global Industrial and Distribution Solutions 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 Global Industrial with a short position of Distribution Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Industrial and Distribution Solutions.
Diversification Opportunities for Global Industrial and Distribution Solutions
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and Distribution is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co and Distribution Solutions Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribution Solutions and Global Industrial 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 Global Industrial Co are associated (or correlated) with Distribution Solutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Distribution Solutions has no effect on the direction of Global Industrial i.e., Global Industrial and Distribution Solutions go up and down completely randomly.
Pair Corralation between Global Industrial and Distribution Solutions
Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the Distribution Solutions. In addition to that, Global Industrial is 1.13 times more volatile than Distribution Solutions Group. It trades about -0.07 of its total potential returns per unit of risk. Distribution Solutions Group is currently generating about -0.02 per unit of volatility. If you would invest 3,550 in Distribution Solutions Group on November 2, 2024 and sell it today you would lose (252.00) from holding Distribution Solutions Group or give up 7.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Industrial Co vs. Distribution Solutions Group
Performance |
| Timeline |
| Global Industrial |
| Distribution Solutions |
Global Industrial and Distribution Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Industrial and Distribution Solutions
The main advantage of trading using opposite Global Industrial and Distribution Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Industrial position performs unexpectedly, Distribution Solutions 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 Distribution Solutions will offset losses from the drop in Distribution Solutions' long position.| Global Industrial vs. Distribution Solutions Group | Global Industrial vs. Core Main | Global Industrial vs. Applied Industrial Technologies | Global Industrial vs. BlueLinx Holdings |
| Distribution Solutions vs. Global Industrial Co | Distribution Solutions vs. EVI Industries | Distribution Solutions vs. Core Main | Distribution Solutions vs. Watsco Inc |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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