Correlation Between Carrier Global and Builders FirstSource
Can any of the company-specific risk be diversified away by investing in both Carrier Global and Builders FirstSource 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 Carrier Global and Builders FirstSource into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carrier Global Corp and Builders FirstSource, you can compare the effects of market volatilities on Carrier Global and Builders FirstSource 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 Carrier Global with a short position of Builders FirstSource. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carrier Global and Builders FirstSource.
Diversification Opportunities for Carrier Global and Builders FirstSource
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Carrier and Builders is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Carrier Global Corp and Builders FirstSource in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Builders FirstSource and Carrier Global 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 Carrier Global Corp are associated (or correlated) with Builders FirstSource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Builders FirstSource has no effect on the direction of Carrier Global i.e., Carrier Global and Builders FirstSource go up and down completely randomly.
Pair Corralation between Carrier Global and Builders FirstSource
Given the investment horizon of 90 days Carrier Global Corp is expected to under-perform the Builders FirstSource. But the stock apears to be less risky and, when comparing its historical volatility, Carrier Global Corp is 1.03 times less risky than Builders FirstSource. The stock trades about -0.08 of its potential returns per unit of risk. The Builders FirstSource is currently generating about -0.02 of returns per unit of risk over similar time horizon. 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Carrier Global Corp vs. Builders FirstSource
Performance |
| Timeline |
| Carrier Global Corp |
| Builders FirstSource |
Carrier Global and Builders FirstSource Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carrier Global and Builders FirstSource
The main advantage of trading using opposite Carrier Global and Builders FirstSource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carrier Global position performs unexpectedly, Builders FirstSource 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 Builders FirstSource will offset losses from the drop in Builders FirstSource's long position.| Carrier Global vs. Johnson Controls International | Carrier Global vs. Lennox International | Carrier Global vs. Masco | Carrier Global vs. Carlisle Companies Incorporated |
| Builders FirstSource vs. Apogee Enterprises | Builders FirstSource vs. Azek Company | Builders FirstSource vs. Lennox International | Builders FirstSource vs. Gibraltar Industries |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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