Correlation Between Watsco and Russel Metals
Can any of the company-specific risk be diversified away by investing in both Watsco and Russel Metals 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 Russel Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Russel Metals, you can compare the effects of market volatilities on Watsco and Russel Metals 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 Russel Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Russel Metals.
Diversification Opportunities for Watsco and Russel Metals
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Watsco and Russel is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Russel Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Russel Metals 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 Russel Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Russel Metals has no effect on the direction of Watsco i.e., Watsco and Russel Metals go up and down completely randomly.
Pair Corralation between Watsco and Russel Metals
Assuming the 90 days horizon Watsco Inc is expected to generate 0.99 times more return on investment than Russel Metals. However, Watsco Inc is 1.01 times less risky than Russel Metals. It trades about 0.4 of its potential returns per unit of risk. Russel Metals is currently generating about 0.33 per unit of risk. If you would invest 43,510 in Watsco Inc on August 31, 2024 and sell it today you would earn a total of 8,890 from holding Watsco Inc or generate 20.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Watsco Inc vs. Russel Metals
Performance |
| Timeline |
| Watsco Inc |
| Russel Metals |
Watsco and Russel Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and Russel Metals
The main advantage of trading using opposite Watsco and Russel Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco position performs unexpectedly, Russel Metals 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 Russel Metals will offset losses from the drop in Russel Metals' long position.| Watsco vs. SCIENCE IN SPORT | Watsco vs. Air Transport Services | Watsco vs. The Boston Beer | Watsco vs. Major Drilling Group |
| Russel Metals vs. SBI Insurance Group | Russel Metals vs. AAC TECHNOLOGHLDGADR | Russel Metals vs. REVO INSURANCE SPA | Russel Metals vs. The Hanover Insurance |
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.
Other Complementary Tools
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators |