Correlation Between Watsco and Addtech AB
Can any of the company-specific risk be diversified away by investing in both Watsco and Addtech AB 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 Watsco and Addtech AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Addtech AB, you can compare the effects of market volatilities on Watsco and Addtech AB 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 Watsco with a short position of Addtech AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Addtech AB.
Diversification Opportunities for Watsco and Addtech AB
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Watsco and Addtech is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Addtech AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Addtech AB and Watsco 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 Watsco Inc are associated (or correlated) with Addtech AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Addtech AB has no effect on the direction of Watsco i.e., Watsco and Addtech AB go up and down completely randomly.
Pair Corralation between Watsco and Addtech AB
Assuming the 90 days horizon Watsco Inc is expected to generate 1.18 times more return on investment than Addtech AB. However, Watsco is 1.18 times more volatile than Addtech AB. It trades about 0.38 of its potential returns per unit of risk. Addtech AB is currently generating about -0.01 per unit of risk. If you would invest 43,750 in Watsco Inc on September 3, 2024 and sell it today you would earn a total of 8,290 from holding Watsco Inc or generate 18.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watsco Inc vs. Addtech AB
Performance |
| Timeline |
| Watsco Inc |
| Addtech AB |
Watsco and Addtech AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and Addtech AB
The main advantage of trading using opposite Watsco and Addtech AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco position performs unexpectedly, Addtech AB 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 Addtech AB will offset losses from the drop in Addtech AB's long position.| Watsco vs. Zijin Mining Group | Watsco vs. VARIOUS EATERIES LS | Watsco vs. Evolution Mining Limited | Watsco vs. Waste Management |
| Addtech AB vs. CapitaLand Investment Limited | Addtech AB vs. Japan Tobacco | Addtech AB vs. Scandinavian Tobacco Group | Addtech AB vs. BRIT AMER TOBACCO |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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