Correlation Between Armstrong World and Interface
Can any of the company-specific risk be diversified away by investing in both Armstrong World and Interface 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 Interface 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 Interface, you can compare the effects of market volatilities on Armstrong World and Interface 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 Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and Interface.
Diversification Opportunities for Armstrong World and Interface
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between Armstrong and Interface is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Armstrong World i.e., Armstrong World and Interface go up and down completely randomly.
Pair Corralation between Armstrong World and Interface
Considering the 90-day investment horizon Armstrong World Industries is expected to under-perform the Interface. But the stock apears to be less risky and, when comparing its historical volatility, Armstrong World Industries is 1.05 times less risky than Interface. The stock trades about -0.22 of its potential returns per unit of risk. The Interface is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 2,022 in Interface on December 30, 2024 and sell it today you would lose (47.00) from holding Interface or give up 2.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Armstrong World Industries vs. Interface
Performance |
| Timeline |
| Armstrong World Indu |
| Interface |
Armstrong World and Interface Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Armstrong World and Interface
The main advantage of trading using opposite Armstrong World and Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong World position performs unexpectedly, Interface 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 Interface will offset losses from the drop in Interface's long position.| Armstrong World vs. Quanex Building Products | ||
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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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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