Correlation Between WATSCO INC and Superior Plus
Can any of the company-specific risk be diversified away by investing in both WATSCO INC and Superior Plus 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 INC and Superior Plus into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WATSCO INC B and Superior Plus Corp, you can compare the effects of market volatilities on WATSCO INC and Superior Plus 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 INC with a short position of Superior Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of WATSCO INC and Superior Plus.
Diversification Opportunities for WATSCO INC and Superior Plus
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between WATSCO and Superior is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding WATSCO INC B and Superior Plus Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Superior Plus Corp and WATSCO INC 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 B are associated (or correlated) with Superior Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Superior Plus Corp has no effect on the direction of WATSCO INC i.e., WATSCO INC and Superior Plus go up and down completely randomly.
Pair Corralation between WATSCO INC and Superior Plus
Assuming the 90 days trading horizon WATSCO INC B is expected to generate 1.1 times more return on investment than Superior Plus. However, WATSCO INC is 1.1 times more volatile than Superior Plus Corp. It trades about 0.06 of its potential returns per unit of risk. Superior Plus Corp is currently generating about -0.02 per unit of risk. If you would invest 24,332 in WATSCO INC B on September 3, 2024 and sell it today you would earn a total of 17,068 from holding WATSCO INC B or generate 70.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
WATSCO INC B vs. Superior Plus Corp
Performance |
| Timeline |
| WATSCO INC B |
| Superior Plus Corp |
WATSCO INC and Superior Plus Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WATSCO INC and Superior Plus
The main advantage of trading using opposite WATSCO INC and Superior Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WATSCO INC position performs unexpectedly, Superior Plus 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 Superior Plus will offset losses from the drop in Superior Plus' long position.| WATSCO INC vs. Apollo Medical Holdings | WATSCO INC vs. AVITA Medical | WATSCO INC vs. CVS Health | WATSCO INC vs. ScanSource |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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