Correlation Between Masco and Trex
Can any of the company-specific risk be diversified away by investing in both Masco and Trex 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 Trex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Masco and Trex Company, you can compare the effects of market volatilities on Masco and Trex 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 Trex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco and Trex.
Diversification Opportunities for Masco and Trex
Significant diversification
The 3 months correlation between Masco and Trex is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Trex Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trex Company 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 Trex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trex Company has no effect on the direction of Masco i.e., Masco and Trex go up and down completely randomly.
Pair Corralation between Masco and Trex
Considering the 90-day investment horizon Masco is expected to under-perform the Trex. But the stock apears to be less risky and, when comparing its historical volatility, Masco is 1.87 times less risky than Trex. The stock trades about -0.16 of its potential returns per unit of risk. The Trex Company is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 6,286 in Trex Company on August 24, 2024 and sell it today you would earn a total of 748.00 from holding Trex Company or generate 11.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Masco vs. Trex Company
Performance |
| Timeline |
| Masco |
| Trex Company |
Masco and Trex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Masco and Trex
The main advantage of trading using opposite Masco and Trex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco position performs unexpectedly, Trex 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 Trex will offset losses from the drop in Trex's long position.| Masco vs. Trane Technologies plc | Masco vs. Quanex Building Products | Masco vs. Jeld Wen Holding | Masco vs. Azek Company |
| Trex vs. Quanex Building Products | Trex vs. Armstrong World Industries | Trex vs. Gibraltar Industries | Trex vs. Apogee Enterprises |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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