Correlation Between Watsco and Ferguson Plc
Can any of the company-specific risk be diversified away by investing in both Watsco 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 Watsco and Ferguson Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Watsco Inc and Ferguson Plc, you can compare the effects of market volatilities on Watsco 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 Watsco with a short position of Ferguson Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Watsco and Ferguson Plc.
Diversification Opportunities for Watsco and Ferguson Plc
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Watsco and Ferguson is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Watsco Inc and Ferguson Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ferguson Plc and Watsco 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 Watsco Inc 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 Watsco i.e., Watsco and Ferguson Plc go up and down completely randomly.
Pair Corralation between Watsco and Ferguson Plc
Considering the 90-day investment horizon Watsco is expected to generate 14.78 times less return on investment than Ferguson Plc. But when comparing it to its historical volatility, Watsco Inc is 1.63 times less risky than Ferguson Plc. It trades about 0.02 of its potential returns per unit of risk. Ferguson Plc is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 16,905 in Ferguson Plc on May 1, 2025 and sell it today you would earn a total of 5,791 from holding Ferguson Plc or generate 34.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Watsco Inc vs. Ferguson Plc
Performance |
| Timeline |
| Watsco Inc |
| Ferguson Plc |
Watsco and Ferguson Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Watsco and Ferguson Plc
The main advantage of trading using opposite Watsco and Ferguson Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Watsco 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.| Watsco vs. Fastenal Company | Watsco vs. SiteOne Landscape Supply | Watsco vs. Ferguson Plc | Watsco vs. WW Grainger |
| Ferguson Plc vs. DXP Enterprises | Ferguson Plc vs. Global Industrial Co | Ferguson Plc vs. EVI Industries | Ferguson Plc vs. Core Main |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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