Correlation Between Watsco and Ouster
Can any of the company-specific risk be diversified away by investing in both Watsco and Ouster 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 Ouster into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Ouster Inc, you can compare the effects of market volatilities on Watsco and Ouster 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 Ouster. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Ouster.
Diversification Opportunities for Watsco and Ouster
Good diversification
The 3 months correlation between Watsco and Ouster is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Ouster Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ouster Inc 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 Ouster. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ouster Inc has no effect on the direction of Watsco i.e., Watsco and Ouster go up and down completely randomly.
Pair Corralation between Watsco and Ouster
Considering the 90-day investment horizon Watsco Inc is expected to under-perform the Ouster. But the stock apears to be less risky and, when comparing its historical volatility, Watsco Inc is 9.31 times less risky than Ouster. The stock trades about -0.54 of its potential returns per unit of risk. The Ouster Inc is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 6.24 in Ouster Inc on September 25, 2024 and sell it today you would earn a total of 2.76 from holding Ouster Inc or generate 44.23% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.24% |
Values | Daily Returns |
Watsco Inc vs. Ouster Inc
Performance |
Timeline |
Watsco Inc |
Ouster Inc |
Watsco and Ouster Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Watsco and Ouster
The main advantage of trading using opposite Watsco and Ouster positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco position performs unexpectedly, Ouster 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 Ouster will offset losses from the drop in Ouster's long position.Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
Ouster vs. Watsco Inc | Ouster vs. Fastenal Company | Ouster vs. SiteOne Landscape Supply | Ouster vs. Ferguson Plc |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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