Correlation Between Ferguson Plc and Applied Industrial
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and Applied Industrial 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 Ferguson Plc and Applied Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferguson Plc and Applied Industrial Technologies, you can compare the effects of market volatilities on Ferguson Plc and Applied Industrial 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 Ferguson Plc with a short position of Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and Applied Industrial.
Diversification Opportunities for Ferguson Plc and Applied Industrial
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Ferguson and Applied is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and Ferguson Plc 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 Ferguson Plc are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and Applied Industrial go up and down completely randomly.
Pair Corralation between Ferguson Plc and Applied Industrial
Given the investment horizon of 90 days Ferguson Plc is expected to under-perform the Applied Industrial. But the stock apears to be less risky and, when comparing its historical volatility, Ferguson Plc is 1.07 times less risky than Applied Industrial. The stock trades about -0.05 of its potential returns per unit of risk. The Applied Industrial Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 23,234 in Applied Industrial Technologies on November 2, 2024 and sell it today you would earn a total of 3,128 from holding Applied Industrial Technologies or generate 13.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferguson Plc vs. Applied Industrial Technologie
Performance |
| Timeline |
| Ferguson Plc |
| Applied Industrial |
Ferguson Plc and Applied Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferguson Plc and Applied Industrial
The main advantage of trading using opposite Ferguson Plc and Applied Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, Applied Industrial 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 Applied Industrial will offset losses from the drop in Applied Industrial's long position.| Ferguson Plc vs. DXP Enterprises | Ferguson Plc vs. Applied Industrial Technologies | Ferguson Plc vs. Global Industrial Co | Ferguson Plc vs. MSC Industrial Direct |
| Applied Industrial vs. Core Main | Applied Industrial vs. WW Grainger | Applied Industrial vs. DXP Enterprises | Applied Industrial vs. SiteOne Landscape Supply |
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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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