Correlation Between WW Grainger and Pool

Can any of the company-specific risk be diversified away by investing in both WW Grainger and Pool 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 Pool into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WW Grainger and Pool Corporation, you can compare the effects of market volatilities on WW Grainger and Pool 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 Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and Pool.

Diversification Opportunities for WW Grainger and Pool

0.82

Correlation Coefficient

WW Grainger  Pool

Very poor diversification

The 3 months correlation between GWW and Pool is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of WW Grainger i.e., WW Grainger and Pool go up and down completely randomly.

Pair Corralation between WW Grainger and Pool

Considering the 90-day investment horizon WW Grainger is expected to generate 0.72 times more return on investment than Pool. However, WW Grainger is 1.39 times less risky than Pool. It trades about 0.1 of its potential returns per unit of risk. Pool Corporation is currently generating about 0.01 per unit of risk. If you would invest  45,857  in WW Grainger on February 10, 2024 and sell it today you would earn a total of  49,764  from holding WW Grainger or generate 108.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

WW Grainger  vs.  Pool Corp.

WW Grainger

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, WW Grainger is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pool

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pool Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Pool is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with WW Grainger and Pool

The main advantage of trading using opposite WW Grainger and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger position performs unexpectedly, Pool 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 Pool will offset losses from the drop in Pool's long position.

The idea behind WW Grainger and Pool Corporation 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.