Correlation Between Ferguson Plc and IMCD NV
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and IMCD NV 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 IMCD NV into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferguson Plc and IMCD NV, you can compare the effects of market volatilities on Ferguson Plc and IMCD NV 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 IMCD NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and IMCD NV.
Diversification Opportunities for Ferguson Plc and IMCD NV
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ferguson and IMCD is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and IMCD NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IMCD NV 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 IMCD NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IMCD NV has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and IMCD NV go up and down completely randomly.
Pair Corralation between Ferguson Plc and IMCD NV
Given the investment horizon of 90 days Ferguson Plc is expected to generate 1.07 times more return on investment than IMCD NV. However, Ferguson Plc is 1.07 times more volatile than IMCD NV. It trades about 0.03 of its potential returns per unit of risk. IMCD NV is currently generating about 0.01 per unit of risk. If you would invest 16,469 in Ferguson Plc on September 23, 2024 and sell it today you would earn a total of 1,348 from holding Ferguson Plc or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferguson Plc vs. IMCD NV
Performance |
| Timeline |
| Ferguson Plc |
| IMCD NV |
Ferguson Plc and IMCD NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferguson Plc and IMCD NV
The main advantage of trading using opposite Ferguson Plc and IMCD NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, IMCD NV 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 IMCD NV will offset losses from the drop in IMCD NV's long position.The idea behind Ferguson Plc and IMCD NV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| IMCD NV vs. Watsco Inc | IMCD NV vs. Fastenal Company | IMCD NV vs. SiteOne Landscape Supply | IMCD NV vs. Ferguson Plc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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