Correlation Between Fastenal and New Era

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

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

Diversification Opportunities for Fastenal and New Era

0.43

Correlation Coefficient

Fastenal  New Era

Very weak diversification

The 3 months correlation between Fastenal and New is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and New Era Helium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Era Helium 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 New Era. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Era Helium has no effect on the direction of Fastenal i.e., Fastenal and New Era go up and down completely randomly.

Pair Corralation between Fastenal and New Era

Given the investment horizon of 90 days Fastenal Company is expected to under-perform the New Era. But the stock apears to be less risky and, when comparing its historical volatility, Fastenal Company is 15.62 times less risky than New Era. The stock trades about -0.42 of its potential returns per unit of risk. The New Era Helium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  443.00  in New Era Helium on October 13, 2024 and sell it today you would lose (97.00) from holding New Era Helium or give up 21.9% of portfolio value over 90 days.

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

Fastenal Company  vs.  New Era Helium

Fastenal

Risk-Adjusted Performance

0 of 100

Very Weak

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

New Era Helium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days New Era Helium has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fastenal and New Era

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

The idea behind Fastenal Company and New Era Helium 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 Stocks Directory module to find actively traded stocks across global markets.