Correlation Between Global Industrial and Watsco
Can any of the company-specific risk be diversified away by investing in both Global Industrial and Watsco 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 Global Industrial and Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Industrial Co and Watsco Inc, you can compare the effects of market volatilities on Global Industrial and Watsco 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 Global Industrial with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Industrial and Watsco.
Diversification Opportunities for Global Industrial and Watsco
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Global and Watsco is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Global Industrial Co and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc and Global Industrial 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 Global Industrial Co are associated (or correlated) with Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of Global Industrial i.e., Global Industrial and Watsco go up and down completely randomly.
Pair Corralation between Global Industrial and Watsco
Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the Watsco. In addition to that, Global Industrial is 1.69 times more volatile than Watsco Inc. It trades about -0.07 of its total potential returns per unit of risk. Watsco Inc is currently generating about 0.05 per unit of volatility. If you would invest 45,125 in Watsco Inc on November 2, 2024 and sell it today you would earn a total of 3,306 from holding Watsco Inc or generate 7.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Industrial Co vs. Watsco Inc
Performance |
| Timeline |
| Global Industrial |
| Watsco Inc |
Global Industrial and Watsco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Industrial and Watsco
The main advantage of trading using opposite Global Industrial and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Industrial position performs unexpectedly, Watsco 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 Watsco will offset losses from the drop in Watsco's long position.| Global Industrial vs. Distribution Solutions Group | Global Industrial vs. Core Main | Global Industrial vs. Applied Industrial Technologies | Global Industrial vs. BlueLinx Holdings |
| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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