Correlation Between Treatt Plc and Fastenal

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

By analyzing existing cross correlation between Treatt plc and Fastenal Company, you can compare the effects of market volatilities on Treatt Plc 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 Treatt Plc with a short position of Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Treatt Plc and Fastenal.

Diversification Opportunities for Treatt Plc and Fastenal

-0.09

Correlation Coefficient

Treatt Plc  Fastenal

Good diversification

The 3 months correlation between Treatt and Fastenal is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Treatt plc and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Treatt Plc 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 Treatt plc 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 Treatt Plc i.e., Treatt Plc and Fastenal go up and down completely randomly.

Pair Corralation between Treatt Plc and Fastenal

Assuming the 90 days horizon Treatt Plc is expected to generate 6.04 times less return on investment than Fastenal. In addition to that, Treatt Plc is 1.41 times more volatile than Fastenal Company. It trades about 0.01 of its total potential returns per unit of risk. Fastenal Company is currently generating about 0.08 per unit of volatility. If you would invest  4,387  in Fastenal Company on September 26, 2024 and sell it today you would earn a total of  3,061  from holding Fastenal Company or generate 69.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

Treatt plc  vs.  Fastenal Company

Treatt plc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Treatt plc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Treatt Plc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Fastenal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fastenal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Treatt Plc and Fastenal

The main advantage of trading using opposite Treatt Plc and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Treatt Plc 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.

The idea behind Treatt plc and Fastenal 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.