Correlation Between Fastenal and Applied Industrial

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

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

Diversification Opportunities for Fastenal and Applied Industrial

-0.26

Correlation Coefficient

Fastenal  Applied Industrial

Very good diversification

The 3 months correlation between Fastenal and Applied is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial 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 Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of Fastenal i.e., Fastenal and Applied Industrial go up and down completely randomly.

Pair Corralation between Fastenal and Applied Industrial

Given the investment horizon of 90 days Fastenal Company is expected to generate 0.71 times more return on investment than Applied Industrial. However, Fastenal Company is 1.42 times less risky than Applied Industrial. It trades about 0.08 of its potential returns per unit of risk. Applied Industrial Technologies is currently generating about -0.04 per unit of risk. If you would invest  7,151  in Fastenal Company on December 29, 2024 and sell it today you would earn a total of  466.00  from holding Fastenal Company or generate 6.52% 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.  Applied Industrial Technologie

Fastenal

Risk-Adjusted Performance

OK

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. In spite of comparatively unsteady basic indicators, Fastenal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Applied Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Industrial Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward indicators, Applied Industrial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Fastenal and Applied Industrial

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

The idea behind Fastenal Company and Applied Industrial Technologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.