Correlation Between EVI Industries and Ferguson Plc

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

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

Diversification Opportunities for EVI Industries and Ferguson Plc

0.67

Correlation Coefficient

EVI Industries  Ferguson Plc

Poor diversification

The 3 months correlation between EVI and Ferguson is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding EVI Industries and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and EVI Industries 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 EVI Industries 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 EVI Industries i.e., EVI Industries and Ferguson Plc go up and down completely randomly.

Pair Corralation between EVI Industries and Ferguson Plc

Considering the 90-day investment horizon EVI Industries is expected to generate 1.55 times less return on investment than Ferguson Plc. In addition to that, EVI Industries is 2.26 times more volatile than Ferguson Plc. It trades about 0.01 of its total potential returns per unit of risk. Ferguson Plc is currently generating about 0.04 per unit of volatility. If you would invest  13,348  in Ferguson Plc on October 6, 2024 and sell it today you would earn a total of  4,116  from holding Ferguson Plc or generate 30.84% return on investment over 90 days.

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

EVI Industries  vs.  Ferguson Plc

EVI Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EVI Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Ferguson Plc

Risk-Adjusted Performance

0 of 100

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 EVI Industries and Ferguson Plc

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

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.