Correlation Between WW Grainger and Distribution Solutions
Can any of the company-specific risk be diversified away by investing in both WW Grainger 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 WW Grainger and Distribution Solutions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW Grainger and Distribution Solutions Group, you can compare the effects of market volatilities on WW Grainger 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 WW Grainger with a short position of Distribution Solutions. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and Distribution Solutions.
Diversification Opportunities for WW Grainger and Distribution Solutions
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between GWW and Distribution is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Distribution Solutions Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Distribution Solutions and WW Grainger 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 WW Grainger 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 WW Grainger i.e., WW Grainger and Distribution Solutions go up and down completely randomly.
Pair Corralation between WW Grainger and Distribution Solutions
Considering the 90-day investment horizon WW Grainger is expected to generate 0.41 times more return on investment than Distribution Solutions. However, WW Grainger is 2.42 times less risky than Distribution Solutions. It trades about 0.26 of its potential returns per unit of risk. Distribution Solutions Group is currently generating about -0.04 per unit of risk. If you would invest 110,223 in WW Grainger on August 27, 2024 and sell it today you would earn a total of 10,442 from holding WW Grainger or generate 9.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WW Grainger vs. Distribution Solutions Group
Performance |
| Timeline |
| WW Grainger |
| Distribution Solutions |
WW Grainger and Distribution Solutions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WW Grainger and Distribution Solutions
The main advantage of trading using opposite WW Grainger and Distribution Solutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger 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.| WW Grainger vs. Watsco Inc | WW Grainger vs. Pool Corporation | WW Grainger vs. MSC Industrial Direct | WW Grainger vs. Applied Industrial Technologies |
| Distribution Solutions vs. Global Industrial Co | Distribution Solutions vs. BlueLinx Holdings | Distribution Solutions vs. WESCO International | Distribution Solutions vs. MSC Industrial Direct |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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