Correlation Between Fastenal and Business Development

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

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

Diversification Opportunities for Fastenal and Business Development

0.58

Correlation Coefficient

Fastenal  Business Development

Very weak diversification

The 3 months correlation between Fastenal and Business is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Business Development Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business Development Corp 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 Business Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business Development Corp has no effect on the direction of Fastenal i.e., Fastenal and Business Development go up and down completely randomly.

Pair Corralation between Fastenal and Business Development

Given the investment horizon of 90 days Fastenal Company is expected to under-perform the Business Development. In addition to that, Fastenal is 94.5 times more volatile than Business Development Corp. It trades about -0.02 of its total potential returns per unit of risk. Business Development Corp is currently generating about 0.15 per unit of volatility. If you would invest  1,000.00  in Business Development Corp on September 22, 2024 and sell it today you would earn a total of  1.00  from holding Business Development Corp or generate 0.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.73%
Values	Daily Returns

Fastenal Company  vs.  Business Development Corp

Fastenal

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fastenal is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Business Development Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Business Development Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Business Development is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fastenal and Business Development

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

The idea behind Fastenal Company and Business Development Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.