Correlation Between Armstrong World and Lennox International
Can any of the company-specific risk be diversified away by investing in both Armstrong World and Lennox International 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 Armstrong World and Lennox International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armstrong World Industries and Lennox International, you can compare the effects of market volatilities on Armstrong World and Lennox International 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 Armstrong World with a short position of Lennox International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and Lennox International.
Diversification Opportunities for Armstrong World and Lennox International
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Armstrong and Lennox is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Lennox International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lennox International and Armstrong World 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 Armstrong World Industries are associated (or correlated) with Lennox International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lennox International has no effect on the direction of Armstrong World i.e., Armstrong World and Lennox International go up and down completely randomly.
Pair Corralation between Armstrong World and Lennox International
Considering the 90-day investment horizon Armstrong World Industries is expected to generate 0.9 times more return on investment than Lennox International. However, Armstrong World Industries is 1.11 times less risky than Lennox International. It trades about 0.17 of its potential returns per unit of risk. Lennox International is currently generating about 0.14 per unit of risk. If you would invest 6,422 in Armstrong World Industries on August 27, 2024 and sell it today you would earn a total of 9,486 from holding Armstrong World Industries or generate 147.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Armstrong World Industries vs. Lennox International
Performance |
| Timeline |
| Armstrong World Indu |
| Lennox International |
Armstrong World and Lennox International Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Armstrong World and Lennox International
The main advantage of trading using opposite Armstrong World and Lennox International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong World position performs unexpectedly, Lennox International 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 Lennox International will offset losses from the drop in Lennox International's long position.| Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | Armstrong World vs. Janus International Group |
| Lennox International vs. Carrier Global Corp | Lennox International vs. Johnson Controls International | Lennox International vs. Masco | Lennox International vs. Carlisle Companies Incorporated |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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