Correlation Between Watsco and Fastenal
Can any of the company-specific risk be diversified away by investing in both Watsco and Fastenal 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 Fastenal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Fastenal Company, you can compare the effects of market volatilities on Watsco and Fastenal 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 Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Fastenal.
Diversification Opportunities for Watsco and Fastenal
Almost no diversification
The 3 months correlation between Watsco and Fastenal is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal 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 Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Watsco i.e., Watsco and Fastenal go up and down completely randomly.
Pair Corralation between Watsco and Fastenal
Considering the 90-day investment horizon Watsco Inc is expected to under-perform the Fastenal. But the stock apears to be less risky and, when comparing its historical volatility, Watsco Inc is 1.01 times less risky than Fastenal. The stock trades about -0.12 of its potential returns per unit of risk. The Fastenal Company is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 7,564 in Fastenal Company on November 18, 2024 and sell it today you would lose (86.00) from holding Fastenal Company or give up 1.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watsco Inc vs. Fastenal Company
Performance |
| Timeline |
| Watsco Inc |
| Fastenal |
Watsco and Fastenal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and Fastenal
The main advantage of trading using opposite Watsco and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco position performs unexpectedly, Fastenal 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 Fastenal will offset losses from the drop in Fastenal's long position.| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
| Fastenal vs. Applied Industrial Technologies | Fastenal vs. MSC Industrial Direct | Fastenal vs. Ferguson Plc | Fastenal vs. Watsco Inc |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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