Correlation Between Ferguson Plc and MSC Industrial
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and MSC 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 MSC 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 MSC Industrial Direct, you can compare the effects of market volatilities on Ferguson Plc and MSC 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 MSC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and MSC Industrial.
Diversification Opportunities for Ferguson Plc and MSC Industrial
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ferguson and MSC is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and MSC Industrial Direct in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MSC Industrial Direct 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 MSC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MSC Industrial Direct has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and MSC Industrial go up and down completely randomly.
Pair Corralation between Ferguson Plc and MSC Industrial
Given the investment horizon of 90 days Ferguson Plc is expected to generate 0.98 times more return on investment than MSC Industrial. However, Ferguson Plc is 1.02 times less risky than MSC Industrial. It trades about 0.06 of its potential returns per unit of risk. MSC Industrial Direct is currently generating about -0.02 per unit of risk. If you would invest 16,970 in Ferguson Plc on August 27, 2024 and sell it today you would earn a total of 3,924 from holding Ferguson Plc or generate 23.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ferguson Plc vs. MSC Industrial Direct
Performance |
| Timeline |
| Ferguson Plc |
| MSC Industrial Direct |
Ferguson Plc and MSC Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ferguson Plc and MSC Industrial
The main advantage of trading using opposite Ferguson Plc and MSC Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, MSC 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 MSC Industrial will offset losses from the drop in MSC Industrial's long position.| Ferguson Plc vs. Global Industrial Co | Ferguson Plc vs. BlueLinx Holdings | Ferguson Plc vs. WESCO International | Ferguson Plc vs. MSC Industrial Direct |
| MSC Industrial vs. DXP Enterprises | MSC Industrial vs. Core Main | MSC Industrial vs. WW Grainger | MSC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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