Correlation Between Indutrade and Watsco
Can any of the company-specific risk be diversified away by investing in both Indutrade and Watsco 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 Indutrade and Watsco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Indutrade AB and Watsco Inc, you can compare the effects of market volatilities on Indutrade and Watsco 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 Indutrade with a short position of Watsco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Indutrade and Watsco.
Diversification Opportunities for Indutrade and Watsco
Excellent diversification
The 3 months correlation between Indutrade and Watsco is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Indutrade AB and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc and Indutrade 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 Indutrade AB are associated (or correlated) with Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of Indutrade i.e., Indutrade and Watsco go up and down completely randomly.
Pair Corralation between Indutrade and Watsco
Assuming the 90 days horizon Indutrade AB is expected to under-perform the Watsco. But the stock apears to be less risky and, when comparing its historical volatility, Indutrade AB is 1.33 times less risky than Watsco. The stock trades about -0.18 of its potential returns per unit of risk. The Watsco Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 44,462 in Watsco Inc on September 26, 2024 and sell it today you would earn a total of 2,218 from holding Watsco Inc or generate 4.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Indutrade AB vs. Watsco Inc
Performance |
Timeline |
Indutrade AB |
Watsco Inc |
Indutrade and Watsco Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Indutrade and Watsco
The main advantage of trading using opposite Indutrade and Watsco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Indutrade position performs unexpectedly, Watsco 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 Watsco will offset losses from the drop in Watsco's long position.Indutrade vs. WW Grainger | Indutrade vs. Fastenal Company | Indutrade vs. Watsco Inc | Indutrade vs. WATSCO INC B |
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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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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