Correlation Between Azek and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Azek 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 Azek and Trane Technologies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azek Company and Trane Technologies plc, you can compare the effects of market volatilities on Azek 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 Azek with a short position of Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azek and Trane Technologies.
Diversification Opportunities for Azek and Trane Technologies
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Azek and Trane is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company 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 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 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 Azek i.e., Azek and Trane Technologies go up and down completely randomly.
Pair Corralation between Azek and Trane Technologies
Given the investment horizon of 90 days Azek is expected to generate 4.04 times less return on investment than Trane Technologies. In addition to that, Azek is 1.5 times more volatile than Trane Technologies plc. It trades about 0.03 of its total potential returns per unit of risk. Trane Technologies plc is currently generating about 0.15 per unit of volatility. If you would invest 28,054 in Trane Technologies plc on August 27, 2024 and sell it today you would earn a total of 13,695 from holding Trane Technologies plc or generate 48.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Azek Company vs. Trane Technologies plc
Performance |
| Timeline |
| Azek Company |
| Trane Technologies plc |
Azek and Trane Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Azek and Trane Technologies
The main advantage of trading using opposite Azek and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azek 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.| Azek vs. Trex Company | Azek vs. Gibraltar Industries | Azek vs. Travis Perkins PLC | Azek 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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