Correlation Between CEMEX SAB and TopBuild Corp

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Can any of the company-specific risk be diversified away by investing in both CEMEX SAB and TopBuild Corp 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 CEMEX SAB and TopBuild Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CEMEX SAB de and TopBuild Corp, you can compare the effects of market volatilities on CEMEX SAB and TopBuild Corp 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 CEMEX SAB with a short position of TopBuild Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CEMEX SAB and TopBuild Corp.

Diversification Opportunities for CEMEX SAB and TopBuild Corp

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between CEMEX and TopBuild is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding CEMEX SAB de and TopBuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TopBuild Corp and CEMEX SAB 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 CEMEX SAB de are associated (or correlated) with TopBuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TopBuild Corp has no effect on the direction of CEMEX SAB i.e., CEMEX SAB and TopBuild Corp go up and down completely randomly.

Pair Corralation between CEMEX SAB and TopBuild Corp

Assuming the 90 days trading horizon CEMEX SAB is expected to generate 1.7 times less return on investment than TopBuild Corp. In addition to that, CEMEX SAB is 2.21 times more volatile than TopBuild Corp. It trades about 0.1 of its total potential returns per unit of risk. TopBuild Corp is currently generating about 0.39 per unit of volatility. If you would invest  732,500  in TopBuild Corp on September 2, 2024 and sell it today you would earn a total of  78,259  from holding TopBuild Corp or generate 10.68% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy95.24%
ValuesDaily Returns

CEMEX SAB de  vs.  TopBuild Corp

 Performance 
       Timeline  
CEMEX SAB de 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days CEMEX SAB de has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, CEMEX SAB is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.
TopBuild Corp 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in TopBuild Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, TopBuild Corp showed solid returns over the last few months and may actually be approaching a breakup point.

CEMEX SAB and TopBuild Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CEMEX SAB and TopBuild Corp

The main advantage of trading using opposite CEMEX SAB and TopBuild Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CEMEX SAB position performs unexpectedly, TopBuild Corp 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 TopBuild Corp will offset losses from the drop in TopBuild Corp's long position.
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The idea behind CEMEX SAB de and TopBuild Corp 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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