Correlation Between WW Grainger and Genuine Parts

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

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

Diversification Opportunities for WW Grainger and Genuine Parts

0.39

Correlation Coefficient

WW Grainger  Genuine Parts

Weak diversification

The 3 months correlation between GWW and Genuine is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of WW Grainger i.e., WW Grainger and Genuine Parts go up and down completely randomly.

Pair Corralation between WW Grainger and Genuine Parts

Considering the 90-day investment horizon WW Grainger is expected to generate 1.55 times less return on investment than Genuine Parts. But when comparing it to its historical volatility, WW Grainger is 1.11 times less risky than Genuine Parts. It trades about 0.22 of its potential returns per unit of risk. Genuine Parts Co is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  11,431  in Genuine Parts Co on February 14, 2025 and sell it today you would earn a total of  1,317  from holding Genuine Parts Co or generate 11.52% 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.  Genuine Parts Co

WW Grainger

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, WW Grainger may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Genuine Parts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Genuine Parts is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with WW Grainger and Genuine Parts

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

The idea behind WW Grainger and Genuine Parts Co 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.