Correlation Between CITY OFFICE and Fastenal

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

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

Diversification Opportunities for CITY OFFICE and Fastenal

0.87

Correlation Coefficient

CITY OFFICE  Fastenal

Very poor diversification

The 3 months correlation between CITY and Fastenal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding CITY OFFICE REIT and Fastenal Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastenal and CITY OFFICE 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 CITY OFFICE REIT 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 CITY OFFICE i.e., CITY OFFICE and Fastenal go up and down completely randomly.

Pair Corralation between CITY OFFICE and Fastenal

Assuming the 90 days horizon CITY OFFICE REIT is expected to generate 2.83 times more return on investment than Fastenal. However, CITY OFFICE is 2.83 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 0.16 per unit of risk. If you would invest  432.00  in CITY OFFICE REIT on May 17, 2025 and sell it today you would earn a total of  158.00  from holding CITY OFFICE REIT or generate 36.57% return on investment over 90 days.

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

CITY OFFICE REIT  vs.  Fastenal Company

CITY OFFICE REIT

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CITY OFFICE REIT are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CITY OFFICE reported solid returns over the last few months and may actually be approaching a breakup point.

Fastenal

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fastenal Company are ranked lower than 12 (%) 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.

Pair Trading with CITY OFFICE and Fastenal

The main advantage of trading using opposite CITY OFFICE and Fastenal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CITY OFFICE 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 CITY OFFICE REIT 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.