Correlation Between McGrath RentCorp and Acco Brands

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

By analyzing existing cross correlation between McGrath RentCorp and Acco Brands, you can compare the effects of market volatilities on McGrath RentCorp and Acco Brands 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 McGrath RentCorp with a short position of Acco Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of McGrath RentCorp and Acco Brands.

Diversification Opportunities for McGrath RentCorp and Acco Brands

0.82

Correlation Coefficient

McGrath RentCorp  Acco Brands

Very poor diversification

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

Pair Corralation between McGrath RentCorp and Acco Brands

Given the investment horizon of 90 days McGrath RentCorp is expected to under-perform the Acco Brands. But the stock apears to be less risky and, when comparing its historical volatility, McGrath RentCorp is 1.33 times less risky than Acco Brands. The stock trades about -0.21 of its potential returns per unit of risk. The Acco Brands is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  553.00  in Acco Brands on February 27, 2024 and sell it today you would lose (49.00) from holding Acco Brands or give up 8.86% of portfolio value over 90 days.

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

McGrath RentCorp  vs.  Acco Brands

McGrath RentCorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days McGrath RentCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Acco Brands

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acco Brands has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with McGrath RentCorp and Acco Brands

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

The idea behind McGrath RentCorp and Acco Brands 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.