Correlation Between Fastenal and Core Main

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

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

Diversification Opportunities for Fastenal and Core Main

0.39

Correlation Coefficient

Fastenal  Core Main

Weak diversification

The 3 months correlation between Fastenal and Core is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Core Main in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Core Main 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 Core Main. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Core Main has no effect on the direction of Fastenal i.e., Fastenal and Core Main go up and down completely randomly.

Pair Corralation between Fastenal and Core Main

Given the investment horizon of 90 days Fastenal Company is expected to generate 0.6 times more return on investment than Core Main. However, Fastenal Company is 1.67 times less risky than Core Main. It trades about 0.21 of its potential returns per unit of risk. Core Main is currently generating about 0.03 per unit of risk. If you would invest  6,673  in Fastenal Company on September 3, 2024 and sell it today you would earn a total of  1,683  from holding Fastenal Company or generate 25.22% return on investment over 90 days.

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

Fastenal Company  vs.  Core Main

Fastenal

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastenal unveiled solid returns over the last few months and may actually be approaching a breakup point.

Core Main

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Core Main are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Core Main is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fastenal and Core Main

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

The idea behind Fastenal Company and Core Main 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 Global Correlations module to find global opportunities by holding instruments from different markets.