Correlation Between Fastenal and Dow Jones
Can any of the company-specific risk be diversified away by investing in both Fastenal and Dow Jones 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 Fastenal and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fastenal Company and Dow Jones Industrial, you can compare the effects of market volatilities on Fastenal and Dow Jones 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 Fastenal with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fastenal and Dow Jones.
Diversification Opportunities for Fastenal and Dow Jones
Almost no diversification
The 3 months correlation between Fastenal and Dow is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Fastenal 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 Fastenal Company are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Fastenal i.e., Fastenal and Dow Jones go up and down completely randomly.
Pair Corralation between Fastenal and Dow Jones
Given the investment horizon of 90 days Fastenal Company is expected to generate 1.69 times more return on investment than Dow Jones. However, Fastenal is 1.69 times more volatile than Dow Jones Industrial. It trades about 0.22 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.27 per unit of risk. If you would invest 7,761 in Fastenal Company on August 30, 2024 and sell it today you would earn a total of 610.00 from holding Fastenal Company or generate 7.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fastenal Company vs. Dow Jones Industrial
Performance |
| Timeline |
Fastenal and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
Fastenal Company
Pair trading matchups for Fastenal
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with Fastenal and Dow Jones
The main advantage of trading using opposite Fastenal and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastenal position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal vs. Watsco Inc |
| Dow Jones vs. Kaltura | Dow Jones vs. Artisan Partners Asset | Dow Jones vs. US Global Investors | Dow Jones vs. Analog Devices |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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