Correlation Between Azek and Latham
Can any of the company-specific risk be diversified away by investing in both Azek and Latham 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 Latham into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azek Company and Latham Group, you can compare the effects of market volatilities on Azek and Latham 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 Latham. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azek and Latham.
Diversification Opportunities for Azek and Latham
Weak diversification
The 3 months correlation between Azek and Latham is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and Latham Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Latham Group 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 Latham. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Latham Group has no effect on the direction of Azek i.e., Azek and Latham go up and down completely randomly.
Pair Corralation between Azek and Latham
Given the investment horizon of 90 days Azek is expected to generate 1.44 times less return on investment than Latham. But when comparing it to its historical volatility, Azek Company is 2.43 times less risky than Latham. It trades about 0.07 of its potential returns per unit of risk. Latham Group is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 440.00 in Latham Group on October 25, 2024 and sell it today you would earn a total of 265.00 from holding Latham Group or generate 60.23% 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. Latham Group
Performance |
| Timeline |
| Azek Company |
| Latham Group |
Azek and Latham Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azek and Latham
The main advantage of trading using opposite Azek and Latham positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azek position performs unexpectedly, Latham 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 Latham will offset losses from the drop in Latham's long position.| Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
| Latham vs. Janus International Group | Latham vs. Quanex Building Products | Latham vs. GMS Inc | Latham vs. Gibraltar Industries |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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