Correlation Between Fastenal and Oil States

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

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

Diversification Opportunities for Fastenal and Oil States

0.46

Correlation Coefficient

Fastenal  Oil States

Very weak diversification

The 3 months correlation between Fastenal and Oil is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and Oil States International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oil States International 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 Oil States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oil States International has no effect on the direction of Fastenal i.e., Fastenal and Oil States go up and down completely randomly.

Pair Corralation between Fastenal and Oil States

Given the investment horizon of 90 days Fastenal Company is expected to generate 0.56 times more return on investment than Oil States. However, Fastenal Company is 1.79 times less risky than Oil States. It trades about 0.21 of its potential returns per unit of risk. Oil States International is currently generating about 0.08 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	Weak
Accuracy	100.0%
Values	Daily Returns

Fastenal Company  vs.  Oil States International

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.

Oil States International

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Oil States International are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward indicators, Oil States unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fastenal and Oil States

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

The idea behind Fastenal Company and Oil States International 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.