Correlation Between Armstrong World and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Armstrong World and Trane Technologies 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 Trane Technologies 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 Trane Technologies plc, you can compare the effects of market volatilities on Armstrong World and Trane Technologies 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 Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and Trane Technologies.
Diversification Opportunities for Armstrong World and Trane Technologies
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Armstrong and Trane is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Trane Technologies plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trane Technologies plc 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 Trane Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trane Technologies plc has no effect on the direction of Armstrong World i.e., Armstrong World and Trane Technologies go up and down completely randomly.
Pair Corralation between Armstrong World and Trane Technologies
Considering the 90-day investment horizon Armstrong World Industries is expected to generate 0.88 times more return on investment than Trane Technologies. However, Armstrong World Industries is 1.13 times less risky than Trane Technologies. It trades about 0.43 of its potential returns per unit of risk. Trane Technologies plc is currently generating about 0.14 per unit of risk. If you would invest 13,790 in Armstrong World Industries on August 24, 2024 and sell it today you would earn a total of 1,919 from holding Armstrong World Industries or generate 13.92% 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. Trane Technologies plc
Performance |
| Timeline |
| Armstrong World Indu |
| Trane Technologies plc |
Armstrong World and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Armstrong World and Trane Technologies
The main advantage of trading using opposite Armstrong World and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong World position performs unexpectedly, Trane Technologies 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 Trane Technologies will offset losses from the drop in Trane Technologies' 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 |
| Trane Technologies vs. Fortune Brands Innovations | Trane Technologies vs. Johnson Controls International | Trane Technologies vs. Lennox International | Trane Technologies vs. Builders FirstSource |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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