Correlation Between Ferguson Plc and Global Industrial

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

By analyzing existing cross correlation between Ferguson Plc and Global Industrial Co, you can compare the effects of market volatilities on Ferguson Plc and Global Industrial 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 Ferguson Plc with a short position of Global Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and Global Industrial.

Diversification Opportunities for Ferguson Plc and Global Industrial

0.72

Correlation Coefficient

Ferguson Plc  Global Industrial

Poor diversification

The 3 months correlation between Ferguson and Global is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Global Industrial Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Industrial and Ferguson Plc 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 Ferguson Plc are associated (or correlated) with Global Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Industrial has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and Global Industrial go up and down completely randomly.

Pair Corralation between Ferguson Plc and Global Industrial

Given the investment horizon of 90 days Ferguson Plc is expected to generate 0.94 times more return on investment than Global Industrial. However, Ferguson Plc is 1.06 times less risky than Global Industrial. It trades about -0.05 of its potential returns per unit of risk. Global Industrial Co is currently generating about -0.07 per unit of risk. If you would invest  17,270  in Ferguson Plc on December 29, 2024 and sell it today you would lose (972.00) from holding Ferguson Plc or give up 5.63% of portfolio value over 90 days.

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

Ferguson Plc  vs.  Global Industrial Co

Ferguson Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ferguson Plc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Global Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Global Industrial Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's forward indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ferguson Plc and Global Industrial

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

The idea behind Ferguson Plc and Global Industrial Co 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.