Correlation Between Lennox International and Azek
Can any of the company-specific risk be diversified away by investing in both Lennox International and Azek 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 Lennox International and Azek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and Azek Company, you can compare the effects of market volatilities on Lennox International and Azek 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 Lennox International with a short position of Azek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Azek.
Diversification Opportunities for Lennox International and Azek
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lennox and Azek is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and Lennox International 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 Lennox International are associated (or correlated) with Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Lennox International i.e., Lennox International and Azek go up and down completely randomly.
Pair Corralation between Lennox International and Azek
Considering the 90-day investment horizon Lennox International is expected to generate 2.46 times less return on investment than Azek. In addition to that, Lennox International is 1.13 times more volatile than Azek Company. It trades about 0.17 of its total potential returns per unit of risk. Azek Company is currently generating about 0.48 per unit of volatility. If you would invest 4,223 in Azek Company on August 24, 2024 and sell it today you would earn a total of 758.00 from holding Azek Company or generate 17.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennox International vs. Azek Company
Performance |
| Timeline |
| Lennox International |
| Azek Company |
Lennox International and Azek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and Azek
The main advantage of trading using opposite Lennox International and Azek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International position performs unexpectedly, Azek 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 Azek will offset losses from the drop in Azek's long position.| Lennox International vs. Carrier Global Corp | Lennox International vs. Johnson Controls International | Lennox International vs. Masco | Lennox International vs. Carlisle Companies Incorporated |
| Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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