Correlation Between DXP Enterprises and Fastenal
Can any of the company-specific risk be diversified away by investing in both DXP Enterprises and Fastenal 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 DXP Enterprises and Fastenal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DXP Enterprises and Fastenal Company, you can compare the effects of market volatilities on DXP Enterprises and Fastenal 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 DXP Enterprises with a short position of Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and Fastenal.
Diversification Opportunities for DXP Enterprises and Fastenal
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DXP and Fastenal is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and Fastenal go up and down completely randomly.
Pair Corralation between DXP Enterprises and Fastenal
Given the investment horizon of 90 days DXP Enterprises is expected to generate 2.05 times more return on investment than Fastenal. However, DXP Enterprises is 2.05 times more volatile than Fastenal Company. It trades about 0.2 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.21 per unit of risk. If you would invest 5,180 in DXP Enterprises on August 26, 2024 and sell it today you would earn a total of 1,953 from holding DXP Enterprises or generate 37.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
DXP Enterprises vs. Fastenal Company
Performance |
| Timeline |
| DXP Enterprises |
| Fastenal |
DXP Enterprises and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DXP Enterprises and Fastenal
The main advantage of trading using opposite DXP Enterprises and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DXP Enterprises position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal's long position.| DXP Enterprises vs. Global Industrial Co | DXP Enterprises vs. BlueLinx Holdings | DXP Enterprises vs. WESCO International | DXP Enterprises vs. MSC Industrial Direct |
| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal vs. Watsco Inc |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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