Correlation Between Ferguson Plc and DXP Enterprises
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and DXP Enterprises 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 DXP Enterprises into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferguson Plc and DXP Enterprises, you can compare the effects of market volatilities on Ferguson Plc and DXP Enterprises 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 DXP Enterprises. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and DXP Enterprises.
Diversification Opportunities for Ferguson Plc and DXP Enterprises
0.45 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ferguson and DXP is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and DXP Enterprises in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DXP Enterprises 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 DXP Enterprises. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DXP Enterprises has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and DXP Enterprises go up and down completely randomly.
Pair Corralation between Ferguson Plc and DXP Enterprises
Given the investment horizon of 90 days Ferguson Plc is expected to generate 12.49 times less return on investment than DXP Enterprises. But when comparing it to its historical volatility, Ferguson Plc is 1.67 times less risky than DXP Enterprises. It trades about 0.01 of its potential returns per unit of risk. DXP Enterprises is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 4,964 in DXP Enterprises on August 24, 2024 and sell it today you would earn a total of 1,948 from holding DXP Enterprises or generate 39.24% 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. DXP Enterprises
Performance |
| Timeline |
| Ferguson Plc |
| DXP Enterprises |
Ferguson Plc and DXP Enterprises Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferguson Plc and DXP Enterprises
The main advantage of trading using opposite Ferguson Plc and DXP Enterprises positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, DXP Enterprises 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 DXP Enterprises will offset losses from the drop in DXP Enterprises' 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 |
| DXP Enterprises vs. Global Industrial Co | DXP Enterprises vs. EVI Industries | DXP Enterprises vs. Core Main | DXP Enterprises 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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