Correlation Between Rexel SA and Fastenal

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

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

Diversification Opportunities for Rexel SA and Fastenal

0.32

Correlation Coefficient

Rexel SA  Fastenal

Weak diversification

The 3 months correlation between Rexel and Fastenal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Rexel SA and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Rexel SA 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 Rexel SA 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 Rexel SA i.e., Rexel SA and Fastenal go up and down completely randomly.

Pair Corralation between Rexel SA and Fastenal

Assuming the 90 days horizon Rexel SA is expected to generate 0.37 times more return on investment than Fastenal. However, Rexel SA is 2.72 times less risky than Fastenal. It trades about -0.19 of its potential returns per unit of risk. Fastenal Company is currently generating about -0.39 per unit of risk. If you would invest  2,690  in Rexel SA on January 20, 2024 and sell it today you would lose (62.00) from holding Rexel SA or give up 2.3% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Rexel SA  vs.  Fastenal Company

Rexel SA

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 Rexel SA and Fastenal

The main advantage of trading using opposite Rexel SA and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rexel SA 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 Rexel SA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.