Correlation Between WW Grainger and Northern Oil

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Can any of the company-specific risk be diversified away by investing in both WW Grainger and Northern Oil 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 Northern Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WW Grainger and Northern Oil Gas, you can compare the effects of market volatilities on WW Grainger and Northern Oil 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 Northern Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of WW Grainger and Northern Oil.

Diversification Opportunities for WW Grainger and Northern Oil

0.12
  Correlation Coefficient

Average diversification

The 3 months correlation between GWW and Northern is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Northern Oil Gas in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northern Oil Gas 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 Northern Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northern Oil Gas has no effect on the direction of WW Grainger i.e., WW Grainger and Northern Oil go up and down completely randomly.

Pair Corralation between WW Grainger and Northern Oil

Considering the 90-day investment horizon WW Grainger is expected to generate 2.02 times less return on investment than Northern Oil. But when comparing it to its historical volatility, WW Grainger is 1.34 times less risky than Northern Oil. It trades about 0.25 of its potential returns per unit of risk. Northern Oil Gas is currently generating about 0.38 of returns per unit of risk over similar time horizon. If you would invest  3,521  in Northern Oil Gas on December 29, 2023 and sell it today you would earn a total of  381.00  from holding Northern Oil Gas or generate 10.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

WW Grainger  vs.  Northern Oil Gas

 Performance 
       Timeline  
WW Grainger 

Risk-Adjusted Performance

20 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, WW Grainger showed solid returns over the last few months and may actually be approaching a breakup point.
Northern Oil Gas 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Northern Oil Gas are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Northern Oil is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

WW Grainger and Northern Oil Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with WW Grainger and Northern Oil

The main advantage of trading using opposite WW Grainger and Northern Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WW Grainger position performs unexpectedly, Northern Oil 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 Northern Oil will offset losses from the drop in Northern Oil's long position.
The idea behind WW Grainger and Northern Oil Gas 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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