Correlation Between Fastenal and SiteOne Landscape

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

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

Diversification Opportunities for Fastenal and SiteOne Landscape

0.45

Correlation Coefficient

Fastenal  SiteOne Landscape

Very weak diversification

The 3 months correlation between Fastenal and SiteOne is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and SiteOne Landscape Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SiteOne Landscape Supply 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 SiteOne Landscape. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SiteOne Landscape Supply has no effect on the direction of Fastenal i.e., Fastenal and SiteOne Landscape go up and down completely randomly.

Pair Corralation between Fastenal and SiteOne Landscape

Given the investment horizon of 90 days Fastenal Company is expected to generate 0.78 times more return on investment than SiteOne Landscape. However, Fastenal Company is 1.29 times less risky than SiteOne Landscape. It trades about 0.21 of its potential returns per unit of risk. SiteOne Landscape Supply is currently generating about 0.1 per unit of risk. If you would invest  6,673  in Fastenal Company on September 2, 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.  SiteOne Landscape Supply

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.

SiteOne Landscape Supply

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SiteOne Landscape Supply are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SiteOne Landscape exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fastenal and SiteOne Landscape

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

The idea behind Fastenal Company and SiteOne Landscape Supply 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.