Correlation Between H B and WD 40

Can any of the company-specific risk be diversified away by investing in both H B and WD 40 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 H B and WD 40 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between H B Fuller and WD 40 Company, you can compare the effects of market volatilities on H B and WD 40 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 H B with a short position of WD 40. Check out your portfolio center. Please also check ongoing floating volatility patterns of H B and WD 40.

Diversification Opportunities for H B and WD 40

-0.48

Correlation Coefficient

H B  WD 40

Very good diversification

The 3 months correlation between FUL and WDFC is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding H B Fuller and WD 40 Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WD 40 Company and H B 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 H B Fuller are associated (or correlated) with WD 40. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WD 40 Company has no effect on the direction of H B i.e., H B and WD 40 go up and down completely randomly.

Pair Corralation between H B and WD 40

Considering the 90-day investment horizon H B is expected to generate 2.29 times less return on investment than WD 40. But when comparing it to its historical volatility, H B Fuller is 1.28 times less risky than WD 40. It trades about 0.04 of its potential returns per unit of risk. WD 40 Company is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  18,792  in WD 40 Company on August 31, 2024 and sell it today you would earn a total of  8,917  from holding WD 40 Company or generate 47.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

H B Fuller  vs.  WD 40 Company

H B Fuller

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H B Fuller has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

WD 40 Company

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in WD 40 Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, WD 40 may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with H B and WD 40

The main advantage of trading using opposite H B and WD 40 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H B position performs unexpectedly, WD 40 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 WD 40 will offset losses from the drop in WD 40's long position.

The idea behind H B Fuller and WD 40 Company pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.