Correlation Between Graco and Zebra Technologies

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

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

Diversification Opportunities for Graco and Zebra Technologies

0.2

Correlation Coefficient

Graco  Zebra Technologies

Modest diversification

The 3 months correlation between Graco and Zebra is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Graco Inc and Zebra Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zebra Technologies and Graco 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 Graco Inc are associated (or correlated) with Zebra Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zebra Technologies has no effect on the direction of Graco i.e., Graco and Zebra Technologies go up and down completely randomly.

Pair Corralation between Graco and Zebra Technologies

Considering the 90-day investment horizon Graco Inc is expected to under-perform the Zebra Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Graco Inc is 1.31 times less risky than Zebra Technologies. The stock trades about -0.26 of its potential returns per unit of risk. The Zebra Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  29,296  in Zebra Technologies on February 4, 2024 and sell it today you would earn a total of  1,663  from holding Zebra Technologies or generate 5.68% return on investment over 90 days.

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

Graco Inc  vs.  Zebra Technologies

Graco Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graco Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Graco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Zebra Technologies

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Zebra Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Zebra Technologies sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Graco and Zebra Technologies

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

The idea behind Graco Inc and Zebra Technologies 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.