Correlation Between Armstrong World and Perma Pipe
Can any of the company-specific risk be diversified away by investing in both Armstrong World and Perma Pipe 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 Perma Pipe 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 Perma Pipe International Holdings, you can compare the effects of market volatilities on Armstrong World and Perma Pipe 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 Perma Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and Perma Pipe.
Diversification Opportunities for Armstrong World and Perma Pipe
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Armstrong and Perma is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Perma Pipe International Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perma Pipe Internati 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 Perma Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perma Pipe Internati has no effect on the direction of Armstrong World i.e., Armstrong World and Perma Pipe go up and down completely randomly.
Pair Corralation between Armstrong World and Perma Pipe
Considering the 90-day investment horizon Armstrong World is expected to generate 1.03 times less return on investment than Perma Pipe. But when comparing it to its historical volatility, Armstrong World Industries is 2.78 times less risky than Perma Pipe. It trades about 0.64 of its potential returns per unit of risk. Perma Pipe International Holdings is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest 1,299 in Perma Pipe International Holdings on August 28, 2024 and sell it today you would earn a total of 228.00 from holding Perma Pipe International Holdings or generate 17.55% 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. Perma Pipe International Holdi
Performance |
| Timeline |
| Armstrong World Indu |
| Perma Pipe Internati |
Armstrong World and Perma Pipe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Armstrong World and Perma Pipe
The main advantage of trading using opposite Armstrong World and Perma Pipe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong World position performs unexpectedly, Perma Pipe 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 Perma Pipe will offset losses from the drop in Perma Pipe'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 |
| Perma Pipe vs. Gibraltar Industries | Perma Pipe vs. Quanex Building Products | Perma Pipe vs. Jeld Wen Holding | Perma Pipe vs. Interface |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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