Correlation Between Masco and Beacon Roofing

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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

MascoBeaconDiversified AwayMascoBeaconDiversified Away100%
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 Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.45%
ValuesDaily Returns

Masco  vs.  Beacon Roofing Supply

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -50510
JavaScript chart by amCharts 3.21.15MAS BECN
       Timeline  
Masco 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Masco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Masco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb727476788082
Beacon Roofing Supply 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Beacon Roofing is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb100105110115120

Masco and Beacon Roofing Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-4.63-3.47-2.31-1.140.011.152.313.484.65 0.050.100.15
JavaScript chart by amCharts 3.21.15MAS BECN
       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.
The idea behind Masco and Beacon Roofing Supply 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.
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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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