Correlation Between Beacon Roofing and Masco
Can any of the company-specific risk be diversified away by investing in both Beacon Roofing 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 Beacon Roofing and Masco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beacon Roofing Supply and Masco, you can compare the effects of market volatilities on Beacon Roofing 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 Beacon Roofing with a short position of Masco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and Masco.
Diversification Opportunities for Beacon Roofing and Masco
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Beacon and Masco is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Beacon Roofing 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 Beacon Roofing Supply 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 Beacon Roofing i.e., Beacon Roofing and Masco go up and down completely randomly.
Pair Corralation between Beacon Roofing and Masco
Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 1.54 times more return on investment than Masco. However, Beacon Roofing is 1.54 times more volatile than Masco. It trades about 0.07 of its potential returns per unit of risk. Masco is currently generating about 0.02 per unit of risk. If you would invest 8,589 in Beacon Roofing Supply on August 27, 2024 and sell it today you would earn a total of 2,629 from holding Beacon Roofing Supply or generate 30.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beacon Roofing Supply vs. Masco
Performance |
| Timeline |
| Beacon Roofing Supply |
| Masco |
Beacon Roofing and Masco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beacon Roofing and Masco
The main advantage of trading using opposite Beacon Roofing and Masco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing 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.| Beacon Roofing vs. Quanex Building Products | Beacon Roofing vs. Gibraltar Industries | Beacon Roofing vs. Armstrong World Industries | Beacon Roofing vs. Janus International Group |
| Masco vs. Trex Company | Masco vs. Gibraltar Industries | Masco vs. Travis Perkins PLC | Masco vs. Janus International Group |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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