Correlation Between Watsco and WESCO International
Can any of the company-specific risk be diversified away by investing in both Watsco and WESCO International 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 WESCO International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and WESCO International, you can compare the effects of market volatilities on Watsco and WESCO International 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 WESCO International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and WESCO International.
Diversification Opportunities for Watsco and WESCO International
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Watsco and WESCO is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and WESCO International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESCO International 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 WESCO International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESCO International has no effect on the direction of Watsco i.e., Watsco and WESCO International go up and down completely randomly.
Pair Corralation between Watsco and WESCO International
Considering the 90-day investment horizon Watsco is expected to generate 1.11 times less return on investment than WESCO International. But when comparing it to its historical volatility, Watsco Inc is 2.0 times less risky than WESCO International. It trades about 0.44 of its potential returns per unit of risk. WESCO International is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 17,468 in WESCO International on August 24, 2024 and sell it today you would earn a total of 3,518 from holding WESCO International or generate 20.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Watsco Inc vs. WESCO International
Performance |
| Timeline |
| Watsco Inc |
| WESCO International |
Watsco and WESCO International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and WESCO International
The main advantage of trading using opposite Watsco and WESCO International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco position performs unexpectedly, WESCO International 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 WESCO International will offset losses from the drop in WESCO International's long position.| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
| WESCO International vs. DXP Enterprises | WESCO International vs. Applied Industrial Technologies | WESCO International vs. Ferguson Plc | WESCO International vs. Global Industrial Co |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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