Correlation Between Apogee Enterprises and Trex

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Can any of the company-specific risk be diversified away by investing in both Apogee Enterprises and Trex 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 Apogee Enterprises and Trex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apogee Enterprises and Trex Company, you can compare the effects of market volatilities on Apogee Enterprises and Trex 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 Apogee Enterprises with a short position of Trex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apogee Enterprises and Trex.

Diversification Opportunities for Apogee Enterprises and Trex

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Apogee and Trex is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Apogee Enterprises and Trex Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trex Company and Apogee Enterprises 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 Apogee Enterprises are associated (or correlated) with Trex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trex Company has no effect on the direction of Apogee Enterprises i.e., Apogee Enterprises and Trex go up and down completely randomly.

Pair Corralation between Apogee Enterprises and Trex

Given the investment horizon of 90 days Apogee Enterprises is expected to generate 1.23 times less return on investment than Trex. But when comparing it to its historical volatility, Apogee Enterprises is 1.13 times less risky than Trex. It trades about 0.23 of its potential returns per unit of risk. Trex Company is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  6,286  in Trex Company on August 24, 2024 and sell it today you would earn a total of  748.00  from holding Trex Company or generate 11.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Apogee Enterprises  vs.  Trex Company

 Performance 
       Timeline  
Apogee Enterprises 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Apogee Enterprises are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Apogee Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.
Trex Company 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Trex Company are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Trex may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Apogee Enterprises and Trex Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Apogee Enterprises and Trex

The main advantage of trading using opposite Apogee Enterprises and Trex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apogee Enterprises position performs unexpectedly, Trex 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 Trex will offset losses from the drop in Trex's long position.
The idea behind Apogee Enterprises and Trex 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.
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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