Correlation Between EVI Industries and Watsco

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

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

Diversification Opportunities for EVI Industries and Watsco

0.09

Correlation Coefficient

EVI Industries  Watsco

Significant diversification

The 3 months correlation between EVI and Watsco is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding EVI Industries and Watsco Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Watsco Inc 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 Watsco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Watsco Inc has no effect on the direction of EVI Industries i.e., EVI Industries and Watsco go up and down completely randomly.

Pair Corralation between EVI Industries and Watsco

Considering the 90-day investment horizon EVI Industries is expected to generate 1.43 times more return on investment than Watsco. However, EVI Industries is 1.43 times more volatile than Watsco Inc. It trades about 0.06 of its potential returns per unit of risk. Watsco Inc is currently generating about -0.02 per unit of risk. If you would invest  1,701  in EVI Industries on December 28, 2024 and sell it today you would earn a total of  160.00  from holding EVI Industries or generate 9.41% return on investment over 90 days.

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

EVI Industries  vs.  Watsco Inc

EVI Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EVI Industries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, EVI Industries may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Watsco Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Watsco Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Watsco is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EVI Industries and Watsco

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

The idea behind EVI Industries and Watsco Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.