Correlation Between Beacon Roofing and Watsco
Can any of the company-specific risk be diversified away by investing in both Beacon Roofing and Watsco 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 Beacon Roofing and Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beacon Roofing Supply and Watsco Inc, you can compare the effects of market volatilities on Beacon Roofing and Watsco 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 Beacon Roofing with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and Watsco.
Diversification Opportunities for Beacon Roofing and Watsco
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Beacon and Watsco is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc and Beacon Roofing 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 Beacon Roofing Supply are associated (or correlated) with Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and Watsco go up and down completely randomly.
Pair Corralation between Beacon Roofing and Watsco
Given the investment horizon of 90 days Beacon Roofing is expected to generate 1.02 times less return on investment than Watsco. In addition to that, Beacon Roofing is 1.5 times more volatile than Watsco Inc. It trades about 0.06 of its total potential returns per unit of risk. Watsco Inc is currently generating about 0.1 per unit of volatility. If you would invest 44,004 in Watsco Inc on August 28, 2024 and sell it today you would earn a total of 9,496 from holding Watsco Inc or generate 21.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Beacon Roofing Supply vs. Watsco Inc
Performance |
| Timeline |
| Beacon Roofing Supply |
| Watsco Inc |
Beacon Roofing and Watsco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beacon Roofing and Watsco
The main advantage of trading using opposite Beacon Roofing and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing position performs unexpectedly, Watsco 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 Watsco will offset losses from the drop in Watsco's long position.| Beacon Roofing vs. Global Industrial Co | Beacon Roofing vs. WESCO International | Beacon Roofing vs. MSC Industrial Direct |
| Watsco vs. DXP Enterprises | Watsco vs. Global Industrial Co | Watsco vs. EVI Industries | Watsco vs. Core Main |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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