Correlation Between Beacon Roofing and Trane Technologies
Can any of the company-specific risk be diversified away by investing in both Beacon Roofing 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 Beacon Roofing and Trane Technologies 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 Trane Technologies plc, you can compare the effects of market volatilities on Beacon Roofing 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 Beacon Roofing with a short position of Trane Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and Trane Technologies.
Diversification Opportunities for Beacon Roofing and Trane Technologies
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Beacon and Trane is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply 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 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 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 Beacon Roofing i.e., Beacon Roofing and Trane Technologies go up and down completely randomly.
Pair Corralation between Beacon Roofing and Trane Technologies
Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 0.69 times more return on investment than Trane Technologies. However, Beacon Roofing Supply is 1.45 times less risky than Trane Technologies. It trades about -0.17 of its potential returns per unit of risk. Trane Technologies plc is currently generating about -0.16 per unit of risk. If you would invest 11,927 in Beacon Roofing Supply on November 29, 2024 and sell it today you would lose (367.00) from holding Beacon Roofing Supply or give up 3.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Beacon Roofing Supply vs. Trane Technologies plc
Performance |
Timeline |
Beacon Roofing Supply |
Trane Technologies plc |
Beacon Roofing and Trane Technologies Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Beacon Roofing and Trane Technologies
The main advantage of trading using opposite Beacon Roofing and Trane Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing 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.Beacon Roofing vs. Quanex Building Products | ||
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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