Correlation Between Azek and Masco
Can any of the company-specific risk be diversified away by investing in both Azek and Masco 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 Azek and Masco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azek Company and Masco, you can compare the effects of market volatilities on Azek and Masco 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 Azek with a short position of Masco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azek and Masco.
Diversification Opportunities for Azek and Masco
Weak diversification
The 3 months correlation between Azek and Masco is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Azek 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 Azek Company are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Azek i.e., Azek and Masco go up and down completely randomly.
Pair Corralation between Azek and Masco
Given the investment horizon of 90 days Azek Company is expected to generate 1.37 times more return on investment than Masco. However, Azek is 1.37 times more volatile than Masco. It trades about 0.48 of its potential returns per unit of risk. Masco is currently generating about -0.16 per unit of risk. If you would invest 4,223 in Azek Company on August 24, 2024 and sell it today you would earn a total of 758.00 from holding Azek Company or generate 17.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Azek Company vs. Masco
Performance |
| Timeline |
| Azek Company |
| Masco |
Azek and Masco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azek and Masco
The main advantage of trading using opposite Azek and Masco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azek position performs unexpectedly, Masco 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 Masco will offset losses from the drop in Masco's long position.| Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
| Masco vs. Trane Technologies plc | Masco vs. Quanex Building Products | Masco vs. Jeld Wen Holding | Masco vs. Azek Company |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Portfolio Comparator Compare the composition, asset allocations and performance of any two portfolios in your account | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings |