Correlation Between Masco and Beacon Roofing
Can any of the company-specific risk be diversified away by investing in both Masco and Beacon Roofing 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 Masco and Beacon Roofing into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masco and Beacon Roofing Supply, you can compare the effects of market volatilities on Masco and Beacon Roofing 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 Masco with a short position of Beacon Roofing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco and Beacon Roofing.
Diversification Opportunities for Masco and Beacon Roofing
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Masco and Beacon is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Beacon Roofing Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beacon Roofing Supply and Masco 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 Masco are associated (or correlated) with Beacon Roofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beacon Roofing Supply has no effect on the direction of Masco i.e., Masco and Beacon Roofing go up and down completely randomly.
Pair Corralation between Masco and Beacon Roofing
Considering the 90-day investment horizon Masco is expected to under-perform the Beacon Roofing. In addition to that, Masco is 1.68 times more volatile than Beacon Roofing Supply. It trades about -0.17 of its total potential returns per unit of risk. Beacon Roofing Supply is currently generating about -0.17 per unit of volatility. If you would invest 11,927 in Beacon Roofing Supply on November 29, 2024 and sell it today you would lose (367.00) from holding Beacon Roofing Supply or give up 3.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Masco vs. Beacon Roofing Supply
Performance |
Timeline |
Masco |
Beacon Roofing Supply |
Masco and Beacon Roofing Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Masco and Beacon Roofing
The main advantage of trading using opposite Masco and Beacon Roofing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco position performs unexpectedly, Beacon Roofing 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 Beacon Roofing will offset losses from the drop in Beacon Roofing's long position.Masco vs. Trane Technologies plc | ||
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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