Correlation Between Now and SiteOne Landscape

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

By analyzing existing cross correlation between Now Inc and SiteOne Landscape Supply, you can compare the effects of market volatilities on Now and SiteOne Landscape 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 Now with a short position of SiteOne Landscape. Check out your portfolio center. Please also check ongoing floating volatility patterns of Now and SiteOne Landscape.

Diversification Opportunities for Now and SiteOne Landscape

0.31

Correlation Coefficient

Now  SiteOne Landscape

Weak diversification

The 3 months correlation between Now and SiteOne is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Now Inc and SiteOne Landscape Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SiteOne Landscape Supply and Now 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 Now Inc are associated (or correlated) with SiteOne Landscape. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SiteOne Landscape Supply has no effect on the direction of Now i.e., Now and SiteOne Landscape go up and down completely randomly.

Pair Corralation between Now and SiteOne Landscape

Given the investment horizon of 90 days Now Inc is expected to under-perform the SiteOne Landscape. But the stock apears to be less risky and, when comparing its historical volatility, Now Inc is 1.08 times less risky than SiteOne Landscape. The stock trades about 0.0 of its potential returns per unit of risk. The SiteOne Landscape Supply is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  11,746  in SiteOne Landscape Supply on September 29, 2024 and sell it today you would earn a total of  1,625  from holding SiteOne Landscape Supply or generate 13.83% return on investment over 90 days.

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

Now Inc  vs.  SiteOne Landscape Supply

Now Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Now Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Now is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

SiteOne Landscape Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SiteOne Landscape Supply has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Now and SiteOne Landscape

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

The idea behind Now Inc and SiteOne Landscape Supply 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.