Correlation Between Mission Produce and Fastenal

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

By analyzing existing cross correlation between Mission Produce and Fastenal Company, you can compare the effects of market volatilities on Mission Produce and Fastenal 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 Mission Produce with a short position of Fastenal. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mission Produce and Fastenal.

Diversification Opportunities for Mission Produce and Fastenal

0.69

Correlation Coefficient

Mission Produce  Fastenal

Poor diversification

The 3 months correlation between Mission and Fastenal is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Mission Produce and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Mission Produce 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 Mission Produce are associated (or correlated) with Fastenal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastenal has no effect on the direction of Mission Produce i.e., Mission Produce and Fastenal go up and down completely randomly.

Pair Corralation between Mission Produce and Fastenal

Considering the 90-day investment horizon Mission Produce is expected to generate 0.65 times more return on investment than Fastenal. However, Mission Produce is 1.54 times less risky than Fastenal. It trades about -0.14 of its potential returns per unit of risk. Fastenal Company is currently generating about -0.38 per unit of risk. If you would invest  1,175  in Mission Produce on January 25, 2024 and sell it today you would lose (37.00) from holding Mission Produce or give up 3.15% of portfolio value over 90 days.

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

Mission Produce  vs.  Fastenal Company

Mission Produce

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mission Produce are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Mission Produce may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Fastenal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fastenal Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Fastenal is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mission Produce and Fastenal

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

The idea behind Mission Produce and Fastenal Company 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.