Correlation Between Beacon Roofing and VINCI SA

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Can any of the company-specific risk be diversified away by investing in both Beacon Roofing and VINCI SA 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 VINCI SA 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 VINCI SA, you can compare the effects of market volatilities on Beacon Roofing and VINCI SA 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 VINCI SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and VINCI SA.

Diversification Opportunities for Beacon Roofing and VINCI SA

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Beacon and VINCI is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and VINCI SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VINCI SA 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 VINCI SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VINCI SA has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and VINCI SA go up and down completely randomly.

Pair Corralation between Beacon Roofing and VINCI SA

Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 0.76 times more return on investment than VINCI SA. However, Beacon Roofing Supply is 1.32 times less risky than VINCI SA. It trades about 0.08 of its potential returns per unit of risk. VINCI SA is currently generating about 0.01 per unit of risk. If you would invest  5,419  in Beacon Roofing Supply on September 8, 2024 and sell it today you would earn a total of  5,738  from holding Beacon Roofing Supply or generate 105.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy77.78%
ValuesDaily Returns

Beacon Roofing Supply  vs.  VINCI SA

 Performance 
       Timeline  
Beacon Roofing Supply 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Beacon Roofing displayed solid returns over the last few months and may actually be approaching a breakup point.
VINCI SA 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days VINCI SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Beacon Roofing and VINCI SA Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Beacon Roofing and VINCI SA

The main advantage of trading using opposite Beacon Roofing and VINCI SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing position performs unexpectedly, VINCI SA 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 VINCI SA will offset losses from the drop in VINCI SA's long position.
The idea behind Beacon Roofing Supply and VINCI SA pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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