Correlation Between Xylem and Fastenal

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

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

Diversification Opportunities for Xylem and Fastenal

-0.3

Correlation Coefficient

Xylem  Fastenal

Very good diversification

The 3 months correlation between Xylem and Fastenal is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Xylem Inc and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and Xylem 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 Xylem Inc 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 Xylem i.e., Xylem and Fastenal go up and down completely randomly.

Pair Corralation between Xylem and Fastenal

Considering the 90-day investment horizon Xylem Inc is expected to generate 0.68 times more return on investment than Fastenal. However, Xylem Inc is 1.48 times less risky than Fastenal. It trades about 0.02 of its potential returns per unit of risk. Fastenal Company is currently generating about -0.19 per unit of risk. If you would invest  13,995  in Xylem Inc on August 30, 2025 and sell it today you would earn a total of  117.00  from holding Xylem Inc or generate 0.84% return on investment over 90 days.

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

Xylem Inc  vs.  Fastenal Company

Xylem Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xylem Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Xylem is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Fastenal

Risk-Adjusted Performance

Weakest

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

Pair Trading with Xylem and Fastenal

The main advantage of trading using opposite Xylem and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xylem 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 Xylem Inc 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..