Correlation Between Fastenal and RATIONAL UNADR

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

By analyzing existing cross correlation between Fastenal Company and RATIONAL UNADR 1, you can compare the effects of market volatilities on Fastenal and RATIONAL UNADR 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 RATIONAL UNADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fastenal and RATIONAL UNADR.

Diversification Opportunities for Fastenal and RATIONAL UNADR

-0.38

Correlation Coefficient

Fastenal  RATIONAL UNADR

Very good diversification

The 3 months correlation between Fastenal and RATIONAL is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and RATIONAL UNADR 1 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RATIONAL UNADR 1 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 RATIONAL UNADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RATIONAL UNADR 1 has no effect on the direction of Fastenal i.e., Fastenal and RATIONAL UNADR go up and down completely randomly.

Pair Corralation between Fastenal and RATIONAL UNADR

Assuming the 90 days horizon Fastenal Company is expected to generate 0.71 times more return on investment than RATIONAL UNADR. However, Fastenal Company is 1.4 times less risky than RATIONAL UNADR. It trades about 0.07 of its potential returns per unit of risk. RATIONAL UNADR 1 is currently generating about 0.04 per unit of risk. If you would invest  4,755  in Fastenal Company on September 26, 2024 and sell it today you would earn a total of  2,453  from holding Fastenal Company or generate 51.59% return on investment over 90 days.

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

Fastenal Company  vs.  RATIONAL UNADR 1

Fastenal

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fastenal reported solid returns over the last few months and may actually be approaching a breakup point.

RATIONAL UNADR 1

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RATIONAL UNADR 1 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, RATIONAL UNADR is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fastenal and RATIONAL UNADR

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

The idea behind Fastenal Company and RATIONAL UNADR 1 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.