Correlation Between Lennox International and Advanced Drainage
Can any of the company-specific risk be diversified away by investing in both Lennox International and Advanced Drainage 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 Advanced Drainage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lennox International and Advanced Drainage Systems, you can compare the effects of market volatilities on Lennox International and Advanced Drainage 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 Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lennox International and Advanced Drainage.
Diversification Opportunities for Lennox International and Advanced Drainage
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between Lennox and Advanced is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Advanced Drainage Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Advanced Drainage Systems 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 Advanced Drainage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Advanced Drainage Systems has no effect on the direction of Lennox International i.e., Lennox International and Advanced Drainage go up and down completely randomly.
Pair Corralation between Lennox International and Advanced Drainage
Considering the 90-day investment horizon Lennox International is expected to generate 10.51 times less return on investment than Advanced Drainage. In addition to that, Lennox International is 1.74 times more volatile than Advanced Drainage Systems. It trades about 0.01 of its total potential returns per unit of risk. Advanced Drainage Systems is currently generating about 0.26 per unit of volatility. If you would invest 11,560 in Advanced Drainage Systems on November 1, 2024 and sell it today you would earn a total of 843.00 from holding Advanced Drainage Systems or generate 7.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lennox International vs. Advanced Drainage Systems
Performance |
| Timeline |
| Lennox International |
| Advanced Drainage Systems |
Lennox International and Advanced Drainage Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lennox International and Advanced Drainage
The main advantage of trading using opposite Lennox International and Advanced Drainage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lennox International position performs unexpectedly, Advanced Drainage 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 Advanced Drainage will offset losses from the drop in Advanced Drainage'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 |
| Advanced Drainage vs. Apogee Enterprises | Advanced Drainage vs. Azek Company | Advanced Drainage vs. Lennox International | Advanced Drainage vs. Gibraltar Industries |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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