Correlation Between Fastenal and Watsco
Can any of the company-specific risk be diversified away by investing in both Fastenal 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 Fastenal and Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fastenal Company and Watsco Inc, you can compare the effects of market volatilities on Fastenal 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 Fastenal with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fastenal and Watsco.
Diversification Opportunities for Fastenal and Watsco
Poor diversification
The 3 months correlation between Fastenal and Watsco is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc 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 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 Fastenal i.e., Fastenal and Watsco go up and down completely randomly.
Pair Corralation between Fastenal and Watsco
Given the investment horizon of 90 days Fastenal is expected to generate 1.48 times less return on investment than Watsco. But when comparing it to its historical volatility, Fastenal Company is 1.26 times less risky than Watsco. It trades about 0.08 of its potential returns per unit of risk. Watsco Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 25,258 in Watsco Inc on August 23, 2024 and sell it today you would earn a total of 29,366 from holding Watsco Inc or generate 116.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fastenal Company vs. Watsco Inc
Performance |
| Timeline |
| Fastenal |
| Watsco Inc |
Fastenal and Watsco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fastenal and Watsco
The main advantage of trading using opposite Fastenal and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fastenal 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.| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal vs. Watsco Inc |
| 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
Other Complementary Tools
| Premium Stories Follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope | |
| Portfolio Optimization Compute new portfolio that will generate highest expected return given your specified tolerance for risk | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance |