Correlation Between Ferguson Plc and SiteOne Landscape

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

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

Diversification Opportunities for Ferguson Plc and SiteOne Landscape

0.86

Correlation Coefficient

Ferguson Plc  SiteOne Landscape

Very poor diversification

The 3 months correlation between Ferguson and SiteOne is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc 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 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 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 Ferguson Plc i.e., Ferguson Plc and SiteOne Landscape go up and down completely randomly.

Pair Corralation between Ferguson Plc and SiteOne Landscape

Given the investment horizon of 90 days Ferguson Plc is expected to under-perform the SiteOne Landscape. But the stock apears to be less risky and, when comparing its historical volatility, Ferguson Plc is 1.24 times less risky than SiteOne Landscape. The stock trades about -0.06 of its potential returns per unit of risk. The SiteOne Landscape Supply is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  13,130  in SiteOne Landscape Supply on December 30, 2024 and sell it today you would lose (940.00) from holding SiteOne Landscape Supply or give up 7.16% of portfolio value over 90 days.

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

Ferguson Plc  vs.  SiteOne Landscape Supply

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 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.

SiteOne Landscape Supply

Risk-Adjusted Performance

Very Weak

Over the last 90 days SiteOne Landscape Supply has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, SiteOne Landscape is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ferguson Plc and SiteOne Landscape

The main advantage of trading using opposite Ferguson Plc and SiteOne Landscape positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc 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 Ferguson Plc 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 Stocks Directory module to find actively traded stocks across global markets.