Correlation Between Watsco and Now
Can any of the company-specific risk be diversified away by investing in both Watsco and Now 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 Now into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Now Inc, you can compare the effects of market volatilities on Watsco and Now 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 Now. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Now.
Diversification Opportunities for Watsco and Now
Very weak diversification
The 3 months correlation between Watsco and Now is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Now Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Now Inc 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 Now. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Now Inc has no effect on the direction of Watsco i.e., Watsco and Now go up and down completely randomly.
Pair Corralation between Watsco and Now
Considering the 90-day investment horizon Watsco Inc is expected to under-perform the Now. But the stock apears to be less risky and, when comparing its historical volatility, Watsco Inc is 5.33 times less risky than Now. The stock trades about -0.12 of its potential returns per unit of risk. The Now Inc is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 1,372 in Now Inc on November 18, 2024 and sell it today you would earn a total of 346.00 from holding Now Inc or generate 25.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watsco Inc vs. Now Inc
Performance |
| Timeline |
| Watsco Inc |
| Now Inc |
Watsco and Now Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and Now
The main advantage of trading using opposite Watsco and Now positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco position performs unexpectedly, Now 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 Now will offset losses from the drop in Now's long position.| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
| Now vs. Oil States International | Now vs. Oceaneering International | Now vs. Geospace Technologies | Now vs. Enerflex |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| AI Portfolio Architect Use AI to generate optimal portfolios and find profitable investment opportunities | |
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Economic Indicators Top statistical indicators that provide insights into how an economy is performing | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like | |
| Portfolio Dashboard Portfolio dashboard that provides centralized access to all your investments |