Correlation Between Distribution Solutions and BlueLinx Holdings
Can any of the company-specific risk be diversified away by investing in both Distribution Solutions and BlueLinx Holdings 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 Distribution Solutions and BlueLinx Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Distribution Solutions Group and BlueLinx Holdings, you can compare the effects of market volatilities on Distribution Solutions and BlueLinx Holdings 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 Distribution Solutions with a short position of BlueLinx Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Distribution Solutions and BlueLinx Holdings.
Diversification Opportunities for Distribution Solutions and BlueLinx Holdings
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Distribution and BlueLinx is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Distribution Solutions Group and BlueLinx Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueLinx Holdings and Distribution Solutions 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 Distribution Solutions Group are associated (or correlated) with BlueLinx Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueLinx Holdings has no effect on the direction of Distribution Solutions i.e., Distribution Solutions and BlueLinx Holdings go up and down completely randomly.
Pair Corralation between Distribution Solutions and BlueLinx Holdings
Given the investment horizon of 90 days Distribution Solutions is expected to generate 2.38 times less return on investment than BlueLinx Holdings. But when comparing it to its historical volatility, Distribution Solutions Group is 1.23 times less risky than BlueLinx Holdings. It trades about 0.03 of its potential returns per unit of risk. BlueLinx Holdings is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 10,337 in BlueLinx Holdings on August 24, 2024 and sell it today you would earn a total of 1,999 from holding BlueLinx Holdings or generate 19.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.21% |
| Values | Daily Returns |
Distribution Solutions Group vs. BlueLinx Holdings
Performance |
| Timeline |
| Distribution Solutions |
| BlueLinx Holdings |
Distribution Solutions and BlueLinx Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Distribution Solutions and BlueLinx Holdings
The main advantage of trading using opposite Distribution Solutions and BlueLinx Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Distribution Solutions position performs unexpectedly, BlueLinx Holdings 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 BlueLinx Holdings will offset losses from the drop in BlueLinx Holdings' long position.| Distribution Solutions vs. Global Industrial Co | Distribution Solutions vs. Core Main | Distribution Solutions vs. Applied Industrial Technologies | Distribution Solutions vs. BlueLinx Holdings |
| BlueLinx Holdings vs. DXP Enterprises | BlueLinx Holdings vs. Distribution Solutions Group | BlueLinx Holdings vs. Core Main | BlueLinx Holdings vs. Applied Industrial Technologies |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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