Correlation Between Ferguson Plc and BANDAI NAMCO

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

By analyzing existing cross correlation between Ferguson Plc and BANDAI NAMCO Holdings, you can compare the effects of market volatilities on Ferguson Plc and BANDAI NAMCO 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 BANDAI NAMCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and BANDAI NAMCO.

Diversification Opportunities for Ferguson Plc and BANDAI NAMCO

-0.05

Correlation Coefficient

Ferguson Plc  BANDAI NAMCO

Good diversification

The 3 months correlation between Ferguson and BANDAI is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and BANDAI NAMCO Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANDAI NAMCO Holdings 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 BANDAI NAMCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANDAI NAMCO Holdings has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and BANDAI NAMCO go up and down completely randomly.

Pair Corralation between Ferguson Plc and BANDAI NAMCO

Given the investment horizon of 90 days Ferguson Plc is expected to generate 2.09 times less return on investment than BANDAI NAMCO. But when comparing it to its historical volatility, Ferguson Plc is 1.2 times less risky than BANDAI NAMCO. It trades about 0.02 of its potential returns per unit of risk. BANDAI NAMCO Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,903  in BANDAI NAMCO Holdings on September 28, 2024 and sell it today you would earn a total of  217.00  from holding BANDAI NAMCO Holdings or generate 11.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.68%
Values	Daily Returns

Ferguson Plc  vs.  BANDAI NAMCO Holdings

Ferguson Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ferguson Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BANDAI NAMCO Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ferguson Plc and BANDAI NAMCO

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

The idea behind Ferguson Plc and BANDAI NAMCO Holdings 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.