Correlation Between WW Grainger and Nextplay Technologies

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

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

Diversification Opportunities for WW Grainger and Nextplay Technologies

-0.57

Correlation Coefficient

WW Grainger  Nextplay Technologies

Excellent diversification

The 3 months correlation between GWW and Nextplay is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding WW Grainger and Nextplay Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextplay Technologies 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 Nextplay Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextplay Technologies has no effect on the direction of WW Grainger i.e., WW Grainger and Nextplay Technologies go up and down completely randomly.

Pair Corralation between WW Grainger and Nextplay Technologies

Considering the 90-day investment horizon WW Grainger is expected to under-perform the Nextplay Technologies. But the stock apears to be less risky and, when comparing its historical volatility, WW Grainger is 146.41 times less risky than Nextplay Technologies. The stock trades about -0.19 of its potential returns per unit of risk. The Nextplay Technologies is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Nextplay Technologies on January 26, 2024 and sell it today you would lose (24.00) from holding Nextplay Technologies or give up 37.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	80.95%
Values	Daily Returns

WW Grainger  vs.  Nextplay Technologies

WW Grainger

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WW Grainger are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, WW Grainger may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Nextplay Technologies

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextplay Technologies are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, Nextplay Technologies reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with WW Grainger and Nextplay Technologies

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

The idea behind WW Grainger and Nextplay 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.

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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.