The 24-year-old was linked with a switch to the Premier League side earlier this month. Fredericks, who made 32 appearances as the Cottagers missed out on the Championship play-offs last season, wants to join the Hornets.
New head coach Marco Silva has been busy in the transfer market since succeeding Walter Mazzarri, signing Will Hughes from Derby County, Kiko Femenía from Alavés and, most recently, Nathaniel Chalobah from Chelsea.
The England international spent the second half of last season on loan from Everton and the fact the Hornets have now signed three Englishmen in quick succession suggests a change in their recruitment policy.
Previous head coaches have been heavily reliant on the vast scouting network of the club's owners, the Pozzo family. But the arrivals this summer suggest a new, British, direction.
One stumbling block for Fredericks will be the recent arrival of Femenía who signed a four-year deal with Watford after completing a free transfer on July 1.
The defender joins Daryl Janmaat in giving Silva two senior options at right-back, although the Spaniard is also comfortable playing further forward in midfield too.
Fredericks, who began his career at Tottenham Hotspur and had loan spells at Millwall, Middlesbrough and Brentford before leaving in 2015, was born in nearby Potters Bar and is still based in Hertfordshire.