Correlation Between WW Grainger and Fastenal

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

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

Diversification Opportunities for WW Grainger and Fastenal

0.34

Correlation Coefficient

WW Grainger  Fastenal

Weak diversification

The 3 months correlation between GWW and Fastenal is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of WW Grainger i.e., WW Grainger and Fastenal go up and down completely randomly.

Pair Corralation between WW Grainger and Fastenal

Considering the 90-day investment horizon WW Grainger is expected to generate 13.6 times less return on investment than Fastenal. But when comparing it to its historical volatility, WW Grainger is 1.33 times less risky than Fastenal. It trades about 0.01 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,332  in Fastenal Company on February 10, 2025 and sell it today you would earn a total of  528.00  from holding Fastenal Company or generate 7.2% return on investment over 90 days.

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

WW Grainger  vs.  Fastenal Company

WW Grainger

Risk-Adjusted Performance

Very Weak

Over the last 90 days WW Grainger has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Fastenal

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastenal may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with WW Grainger and Fastenal

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

The idea behind WW Grainger and Fastenal Company 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.