Correlation Between Genuine Parts and Fastenal

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

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

Diversification Opportunities for Genuine Parts and Fastenal

0.23

Correlation Coefficient

Genuine Parts  Fastenal

Modest diversification

The 3 months correlation between Genuine and Fastenal is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Genuine Parts Co and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Genuine Parts 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 Genuine Parts Co 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 Genuine Parts i.e., Genuine Parts and Fastenal go up and down completely randomly.

Pair Corralation between Genuine Parts and Fastenal

Considering the 90-day investment horizon Genuine Parts Co is expected to generate 1.27 times more return on investment than Fastenal. However, Genuine Parts is 1.27 times more volatile than Fastenal Company. It trades about 0.15 of its potential returns per unit of risk. Fastenal Company is currently generating about 0.02 per unit of risk. If you would invest  13,931  in Genuine Parts Co on January 31, 2024 and sell it today you would earn a total of  2,206  from holding Genuine Parts Co or generate 15.84% return on investment over 90 days.

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

Genuine Parts Co  vs.  Fastenal Company

Genuine Parts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Genuine Parts Co are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Genuine Parts exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fastenal

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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 Genuine Parts and Fastenal

The main advantage of trading using opposite Genuine Parts and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genuine Parts 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 Genuine Parts Co 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 CEOs Directory module to screen CEOs from public companies around the world.