Correlation Between Flex and Topbuild Corp
Can any of the company-specific risk be diversified away by investing in both Flex 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 Flex and Topbuild Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Flex and Topbuild Corp, you can compare the effects of market volatilities on Flex 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 Flex with a short position of Topbuild Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Flex and Topbuild Corp.
Diversification Opportunities for Flex and Topbuild Corp
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Flex and Topbuild is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Flex and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and Flex 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 Flex 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 Flex i.e., Flex and Topbuild Corp go up and down completely randomly.
Pair Corralation between Flex and Topbuild Corp
Given the investment horizon of 90 days Flex is expected to generate 1.6 times more return on investment than Topbuild Corp. However, Flex is 1.6 times more volatile than Topbuild Corp. It trades about 0.08 of its potential returns per unit of risk. Topbuild Corp is currently generating about 0.08 per unit of risk. If you would invest 1,053 in Flex on September 3, 2024 and sell it today you would earn a total of 2,844 from holding Flex or generate 270.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Flex vs. Topbuild Corp
Performance |
| Timeline |
| Flex |
| Topbuild Corp |
Flex and Topbuild Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Flex and Topbuild Corp
The main advantage of trading using opposite Flex and Topbuild Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Flex 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.The idea behind Flex 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.| Topbuild Corp vs. MYR Group | Topbuild Corp vs. Comfort Systems USA | Topbuild Corp vs. Arcosa Inc | Topbuild Corp vs. EMCOR Group |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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