Correlation Between BlueLinx Holdings and Ferguson Plc

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

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

Diversification Opportunities for BlueLinx Holdings and Ferguson Plc

0.77

Correlation Coefficient

BlueLinx Holdings  Ferguson Plc

Poor diversification

The 3 months correlation between BlueLinx and Ferguson is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding BlueLinx Holdings and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and BlueLinx Holdings 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 BlueLinx Holdings are associated (or correlated) with Ferguson Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ferguson Plc has no effect on the direction of BlueLinx Holdings i.e., BlueLinx Holdings and Ferguson Plc go up and down completely randomly.

Pair Corralation between BlueLinx Holdings and Ferguson Plc

Considering the 90-day investment horizon BlueLinx Holdings is expected to under-perform the Ferguson Plc. In addition to that, BlueLinx Holdings is 1.69 times more volatile than Ferguson Plc. It trades about -0.16 of its total potential returns per unit of risk. Ferguson Plc is currently generating about -0.06 per unit of volatility. If you would invest  17,270  in Ferguson Plc on December 30, 2024 and sell it today you would lose (1,219) from holding Ferguson Plc or give up 7.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

BlueLinx Holdings  vs.  Ferguson Plc

BlueLinx Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlueLinx Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ferguson Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with BlueLinx Holdings and Ferguson Plc

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

The idea behind BlueLinx Holdings and Ferguson Plc 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.