Correlation Between Lennox International and Quanex Building
Can any of the company-specific risk be diversified away by investing in both Lennox International and Quanex Building 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 Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and Quanex Building Products, you can compare the effects of market volatilities on Lennox International and Quanex Building 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 Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Quanex Building.
Diversification Opportunities for Lennox International and Quanex Building
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lennox and Quanex is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products 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 Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Lennox International i.e., Lennox International and Quanex Building go up and down completely randomly.
Pair Corralation between Lennox International and Quanex Building
Considering the 90-day investment horizon Lennox International is expected to generate 0.62 times more return on investment than Quanex Building. However, Lennox International is 1.6 times less risky than Quanex Building. It trades about 0.11 of its potential returns per unit of risk. Quanex Building Products is currently generating about -0.01 per unit of risk. If you would invest 46,825 in Lennox International on August 27, 2024 and sell it today you would earn a total of 18,944 from holding Lennox International or generate 40.46% 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. Quanex Building Products
Performance |
| Timeline |
| Lennox International |
| Quanex Building Products |
Lennox International and Quanex Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and Quanex Building
The main advantage of trading using opposite Lennox International and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International position performs unexpectedly, Quanex Building 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 Quanex Building will offset losses from the drop in Quanex Building'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 |
| Quanex Building vs. Trex Company | Quanex Building vs. Gibraltar Industries | Quanex Building vs. Travis Perkins PLC | Quanex Building vs. Janus International 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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