Correlation Between Ferguson Plc and Beacon Roofing
Can any of the company-specific risk be diversified away by investing in both Ferguson Plc and Beacon Roofing 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 Beacon Roofing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ferguson Plc and Beacon Roofing Supply, you can compare the effects of market volatilities on Ferguson Plc and Beacon Roofing 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 Beacon Roofing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ferguson Plc and Beacon Roofing.
Diversification Opportunities for Ferguson Plc and Beacon Roofing
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ferguson and Beacon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ferguson Plc and Beacon Roofing Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beacon Roofing 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 Beacon Roofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beacon Roofing Supply has no effect on the direction of Ferguson Plc i.e., Ferguson Plc and Beacon Roofing go up and down completely randomly.
Pair Corralation between Ferguson Plc and Beacon Roofing
Given the investment horizon of 90 days Ferguson Plc is expected to under-perform the Beacon Roofing. But the stock apears to be less risky and, when comparing its historical volatility, Ferguson Plc is 1.52 times less risky than Beacon Roofing. The stock trades about -0.1 of its potential returns per unit of risk. The Beacon Roofing Supply is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 9,695 in Beacon Roofing Supply on March 2, 2024 and sell it today you would earn a total of 11.00 from holding Beacon Roofing Supply or generate 0.11% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ferguson Plc vs. Beacon Roofing Supply
Performance |
Timeline |
Ferguson Plc |
Beacon Roofing Supply |
Ferguson Plc and Beacon Roofing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ferguson Plc and Beacon Roofing
The main advantage of trading using opposite Ferguson Plc and Beacon Roofing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ferguson Plc position performs unexpectedly, Beacon Roofing 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 Beacon Roofing will offset losses from the drop in Beacon Roofing's long position.Ferguson Plc vs. Global Industrial Co | Ferguson Plc vs. EVI Industries | Ferguson Plc vs. Core Main | Ferguson Plc vs. WESCO International |
Beacon Roofing vs. Global Industrial Co | Beacon Roofing vs. EVI Industries | Beacon Roofing vs. Core Main | Beacon Roofing vs. WESCO International |
Check out your portfolio center.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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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