Correlation Between Now and Watsco
Can any of the company-specific risk be diversified away by investing in both Now 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 Now and Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Now Inc and Watsco Inc, you can compare the effects of market volatilities on Now 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 Now with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and Watsco.
Diversification Opportunities for Now and Watsco
Very poor diversification
The 3 months correlation between Now and Watsco is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc and Now 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 Now Inc 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 Now i.e., Now and Watsco go up and down completely randomly.
Pair Corralation between Now and Watsco
Given the investment horizon of 90 days Now Inc is expected to generate 1.84 times more return on investment than Watsco. However, Now is 1.84 times more volatile than Watsco Inc. It trades about 0.34 of its potential returns per unit of risk. Watsco Inc is currently generating about 0.4 per unit of risk. If you would invest 1,198 in Now Inc on August 27, 2024 and sell it today you would earn a total of 297.00 from holding Now Inc or generate 24.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Now Inc vs. Watsco Inc
Performance |
| Timeline |
| Now Inc |
| Watsco Inc |
Now and Watsco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Now and Watsco
The main advantage of trading using opposite Now and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Now 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.| Now vs. Global Industrial Co | Now vs. BlueLinx Holdings | Now vs. WESCO International | Now vs. MSC Industrial Direct |
| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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