Correlation Between Distribution Solutions and Ferguson Plc
Can any of the company-specific risk be diversified away by investing in both Distribution Solutions and Ferguson Plc 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 Distribution Solutions and Ferguson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Distribution Solutions Group and Ferguson Plc, you can compare the effects of market volatilities on Distribution Solutions and Ferguson Plc 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 Distribution Solutions with a short position of Ferguson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distribution Solutions and Ferguson Plc.
Diversification Opportunities for Distribution Solutions and Ferguson Plc
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Distribution and Ferguson is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Distribution Solutions Group and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and Distribution Solutions 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 Distribution Solutions Group are associated (or correlated) with Ferguson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferguson Plc has no effect on the direction of Distribution Solutions i.e., Distribution Solutions and Ferguson Plc go up and down completely randomly.
Pair Corralation between Distribution Solutions and Ferguson Plc
Given the investment horizon of 90 days Distribution Solutions Group is expected to generate 3.52 times more return on investment than Ferguson Plc. However, Distribution Solutions is 3.52 times more volatile than Ferguson Plc. It trades about 0.05 of its potential returns per unit of risk. Ferguson Plc is currently generating about 0.08 per unit of risk. If you would invest 1,786 in Distribution Solutions Group on August 27, 2024 and sell it today you would earn a total of 2,022 from holding Distribution Solutions Group or generate 113.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Distribution Solutions Group vs. Ferguson Plc
Performance |
| Timeline |
| Distribution Solutions |
| Ferguson Plc |
Distribution Solutions and Ferguson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Distribution Solutions and Ferguson Plc
The main advantage of trading using opposite Distribution Solutions and Ferguson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distribution Solutions position performs unexpectedly, Ferguson Plc 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 Ferguson Plc will offset losses from the drop in Ferguson Plc's long position.| Distribution Solutions vs. Global Industrial Co | Distribution Solutions vs. BlueLinx Holdings | Distribution Solutions vs. WESCO International | Distribution Solutions vs. MSC Industrial Direct |
| Ferguson Plc vs. Global Industrial Co | Ferguson Plc vs. BlueLinx Holdings | Ferguson Plc vs. WESCO International | Ferguson Plc vs. MSC Industrial Direct |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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