Correlation Between Applied Industrial and Fastenal

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

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

Diversification Opportunities for Applied Industrial and Fastenal

-0.34

Correlation Coefficient

Applied Industrial  Fastenal

Very good diversification

The 3 months correlation between Applied and Fastenal is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Applied Industrial Technologie and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Applied 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 Applied Industrial Technologies 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 Applied Industrial i.e., Applied Industrial and Fastenal go up and down completely randomly.

Pair Corralation between Applied Industrial and Fastenal

Considering the 90-day investment horizon Applied Industrial Technologies is expected to generate 1.31 times more return on investment than Fastenal. However, Applied Industrial is 1.31 times more volatile than Fastenal Company. It trades about 0.07 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.06 per unit of risk. If you would invest  12,756  in Applied Industrial Technologies on February 9, 2025 and sell it today you would earn a total of  9,295  from holding Applied Industrial Technologies or generate 72.87% return on investment over 90 days.

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

Applied Industrial Technologie  vs.  Fastenal Company

Applied Industrial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Industrial Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in June 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Fastenal

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fastenal may actually be approaching a critical reversion point that can send shares even higher in June 2025.

Pair Trading with Applied Industrial and Fastenal

The main advantage of trading using opposite Applied Industrial and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Industrial 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 Applied Industrial Technologies 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 Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.