Correlation Between Builders FirstSource and Jeld Wen
Can any of the company-specific risk be diversified away by investing in both Builders FirstSource and Jeld Wen 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 Builders FirstSource and Jeld Wen into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Builders FirstSource and Jeld Wen Holding, you can compare the effects of market volatilities on Builders FirstSource and Jeld Wen 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 Builders FirstSource with a short position of Jeld Wen. Check out your portfolio center. Please also check ongoing floating volatility patterns of Builders FirstSource and Jeld Wen.
Diversification Opportunities for Builders FirstSource and Jeld Wen
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Builders and Jeld is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Builders FirstSource and Jeld Wen Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jeld Wen Holding and Builders FirstSource 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 Builders FirstSource are associated (or correlated) with Jeld Wen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jeld Wen Holding has no effect on the direction of Builders FirstSource i.e., Builders FirstSource and Jeld Wen go up and down completely randomly.
Pair Corralation between Builders FirstSource and Jeld Wen
Given the investment horizon of 90 days Builders FirstSource is expected to generate 0.33 times more return on investment than Jeld Wen. However, Builders FirstSource is 3.02 times less risky than Jeld Wen. It trades about -0.02 of its potential returns per unit of risk. Jeld Wen Holding is currently generating about -0.15 per unit of risk. If you would invest 17,922 in Builders FirstSource on August 24, 2024 and sell it today you would lose (331.00) from holding Builders FirstSource or give up 1.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Builders FirstSource vs. Jeld Wen Holding
Performance |
| Timeline |
| Builders FirstSource |
| Jeld Wen Holding |
Builders FirstSource and Jeld Wen Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Builders FirstSource and Jeld Wen
The main advantage of trading using opposite Builders FirstSource and Jeld Wen positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Builders FirstSource position performs unexpectedly, Jeld Wen 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 Jeld Wen will offset losses from the drop in Jeld Wen's long position.| Builders FirstSource vs. Apogee Enterprises | Builders FirstSource vs. Azek Company | Builders FirstSource vs. Lennox International | Builders FirstSource vs. Gibraltar Industries |
| Jeld Wen vs. Gibraltar Industries | Jeld Wen vs. Quanex Building Products | Jeld Wen vs. Perma Pipe International Holdings | Jeld Wen vs. Interface |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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