Correlation Between Vestas Wind and Graco
Can any of the company-specific risk be diversified away by investing in both Vestas Wind and Graco 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 Vestas Wind and Graco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vestas Wind Systems and Graco Inc, you can compare the effects of market volatilities on Vestas Wind and Graco 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 Vestas Wind with a short position of Graco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vestas Wind and Graco.
Diversification Opportunities for Vestas Wind and Graco
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Vestas and Graco is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Vestas Wind Systems and Graco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Graco Inc and Vestas Wind 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 Vestas Wind Systems are associated (or correlated) with Graco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Graco Inc has no effect on the direction of Vestas Wind i.e., Vestas Wind and Graco go up and down completely randomly.
Pair Corralation between Vestas Wind and Graco
Assuming the 90 days horizon Vestas Wind Systems is expected to under-perform the Graco. In addition to that, Vestas Wind is 1.94 times more volatile than Graco Inc. It trades about -0.06 of its total potential returns per unit of risk. Graco Inc is currently generating about 0.04 per unit of volatility. If you would invest 7,691 in Graco Inc on August 29, 2024 and sell it today you would earn a total of 1,370 from holding Graco Inc or generate 17.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vestas Wind Systems vs. Graco Inc
Performance |
| Timeline |
| Vestas Wind Systems |
| Graco Inc |
Vestas Wind and Graco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vestas Wind and Graco
The main advantage of trading using opposite Vestas Wind and Graco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vestas Wind position performs unexpectedly, Graco 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 Graco will offset losses from the drop in Graco's long position.The idea behind Vestas Wind Systems and Graco Inc 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.| Graco vs. Aquagold International | Graco vs. Morningstar Unconstrained Allocation | Graco vs. High Yield Municipal Fund | Graco vs. Thrivent High Yield |
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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