Correlation Between Global Industrial and Ferguson Plc

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

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

Diversification Opportunities for Global Industrial and Ferguson Plc

0.72

Correlation Coefficient

Global Industrial  Ferguson Plc

Poor diversification

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

Pair Corralation between Global Industrial and Ferguson Plc

Considering the 90-day investment horizon Global Industrial Co is expected to under-perform the Ferguson Plc. In addition to that, Global Industrial is 1.06 times more volatile than Ferguson Plc. It trades about -0.07 of its total potential returns per unit of risk. Ferguson Plc is currently generating about -0.05 per unit of volatility. 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

Global Industrial Co  vs.  Ferguson Plc

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.

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.

Pair Trading with Global Industrial and Ferguson Plc

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

The idea behind Global Industrial Co and Ferguson Plc 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.