Correlation Between Ferguson Plc and BlueLinx Holdings
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and BlueLinx Holdings 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 BlueLinx Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferguson Plc and BlueLinx Holdings, you can compare the effects of market volatilities on Ferguson Plc and BlueLinx Holdings 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 BlueLinx Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and BlueLinx Holdings.
Diversification Opportunities for Ferguson Plc and BlueLinx Holdings
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ferguson and BlueLinx is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and BlueLinx Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueLinx Holdings 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 BlueLinx Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueLinx Holdings has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and BlueLinx Holdings go up and down completely randomly.
Pair Corralation between Ferguson Plc and BlueLinx Holdings
Given the investment horizon of 90 days Ferguson Plc is expected to generate 1.72 times less return on investment than BlueLinx Holdings. But when comparing it to its historical volatility, Ferguson Plc is 1.65 times less risky than BlueLinx Holdings. It trades about 0.06 of its potential returns per unit of risk. BlueLinx Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 9,229 in BlueLinx Holdings on August 27, 2024 and sell it today you would earn a total of 3,524 from holding BlueLinx Holdings or generate 38.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferguson Plc vs. BlueLinx Holdings
Performance |
| Timeline |
| Ferguson Plc |
| BlueLinx Holdings |
Ferguson Plc and BlueLinx Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferguson Plc and BlueLinx Holdings
The main advantage of trading using opposite Ferguson Plc and BlueLinx Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, BlueLinx Holdings 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 BlueLinx Holdings will offset losses from the drop in BlueLinx Holdings' long position.| Ferguson Plc vs. Global Industrial Co | Ferguson Plc vs. BlueLinx Holdings | Ferguson Plc vs. WESCO International | Ferguson Plc vs. MSC Industrial Direct |
| BlueLinx Holdings vs. DXP Enterprises | BlueLinx Holdings vs. Distribution Solutions Group | BlueLinx Holdings vs. Core Main | BlueLinx Holdings vs. WESCO International |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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