Correlation Between Fastenal and CosmoSteel Holdings

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

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

Diversification Opportunities for Fastenal and CosmoSteel Holdings

-0.2

Correlation Coefficient

Fastenal  CosmoSteel Holdings

Good diversification

The 3 months correlation between Fastenal and CosmoSteel is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and CosmoSteel Holdings Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CosmoSteel Holdings and Fastenal 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 Fastenal Company are associated (or correlated) with CosmoSteel Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CosmoSteel Holdings has no effect on the direction of Fastenal i.e., Fastenal and CosmoSteel Holdings go up and down completely randomly.

Pair Corralation between Fastenal and CosmoSteel Holdings

Assuming the 90 days horizon Fastenal Company is expected to under-perform the CosmoSteel Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Fastenal Company is 2.28 times less risky than CosmoSteel Holdings. The stock trades about -0.49 of its potential returns per unit of risk. The CosmoSteel Holdings Limited is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  7.15  in CosmoSteel Holdings Limited on October 10, 2024 and sell it today you would lose (0.55) from holding CosmoSteel Holdings Limited or give up 7.69% of portfolio value over 90 days.

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

Fastenal Company  vs.  CosmoSteel Holdings Limited

Fastenal

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fastenal may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CosmoSteel Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CosmoSteel Holdings Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CosmoSteel Holdings is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fastenal and CosmoSteel Holdings

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

The idea behind Fastenal Company and CosmoSteel Holdings Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.