Correlation Between Fastenal and WATSCO INC

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

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

Diversification Opportunities for Fastenal and WATSCO INC

-0.48

Correlation Coefficient

Fastenal  WATSCO INC

Very good diversification

The 3 months correlation between Fastenal and WATSCO is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Fastenal Company and WATSCO INC B in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WATSCO INC B and Fastenal 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 Fastenal Company are associated (or correlated) with WATSCO INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WATSCO INC B has no effect on the direction of Fastenal i.e., Fastenal and WATSCO INC go up and down completely randomly.

Pair Corralation between Fastenal and WATSCO INC

Assuming the 90 days horizon Fastenal Company is expected to generate 1.22 times more return on investment than WATSCO INC. However, Fastenal is 1.22 times more volatile than WATSCO INC B. It trades about 0.15 of its potential returns per unit of risk. WATSCO INC B is currently generating about -0.21 per unit of risk. If you would invest  3,476  in Fastenal Company on April 21, 2025 and sell it today you would earn a total of  463.00  from holding Fastenal Company or generate 13.32% return on investment over 90 days.

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

Fastenal Company  vs.  WATSCO INC B

Fastenal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fastenal reported solid returns over the last few months and may actually be approaching a breakup point.

WATSCO INC B

Risk-Adjusted Performance

Very Weak

Over the last 90 days WATSCO INC B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Fastenal and WATSCO INC

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

The idea behind Fastenal Company and WATSCO INC B 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.

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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.