Correlation Between Ferguson Plc and Fastenal
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and Fastenal 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 Fastenal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferguson Plc and Fastenal Company, you can compare the effects of market volatilities on Ferguson Plc and Fastenal 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 Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and Fastenal.
Diversification Opportunities for Ferguson Plc and Fastenal
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Ferguson and Fastenal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and Fastenal go up and down completely randomly.
Pair Corralation between Ferguson Plc and Fastenal
Given the investment horizon of 90 days Ferguson Plc is expected to generate 1.11 times more return on investment than Fastenal. However, Ferguson Plc is 1.11 times more volatile than Fastenal Company. It trades about 0.08 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.08 per unit of risk. If you would invest 11,240 in Ferguson Plc on August 23, 2024 and sell it today you would earn a total of 9,335 from holding Ferguson Plc or generate 83.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferguson Plc vs. Fastenal Company
Performance |
| Timeline |
| Ferguson Plc |
| Fastenal |
Ferguson Plc and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferguson Plc and Fastenal
The main advantage of trading using opposite Ferguson Plc and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal'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 |
| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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