Correlation Between Mueller Industries and AZZ Incorporated
Can any of the company-specific risk be diversified away by investing in both Mueller Industries and AZZ Incorporated 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 Mueller Industries and AZZ Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mueller Industries and AZZ Incorporated, you can compare the effects of market volatilities on Mueller Industries and AZZ Incorporated 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 Mueller Industries with a short position of AZZ Incorporated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mueller Industries and AZZ Incorporated.
Diversification Opportunities for Mueller Industries and AZZ Incorporated
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Mueller and AZZ is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated and Mueller Industries 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 Mueller Industries are associated (or correlated) with AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of Mueller Industries i.e., Mueller Industries and AZZ Incorporated go up and down completely randomly.
Pair Corralation between Mueller Industries and AZZ Incorporated
Considering the 90-day investment horizon Mueller Industries is expected to generate 1.02 times more return on investment than AZZ Incorporated. However, Mueller Industries is 1.02 times more volatile than AZZ Incorporated. It trades about 0.1 of its potential returns per unit of risk. AZZ Incorporated is currently generating about 0.09 per unit of risk. If you would invest 3,264 in Mueller Industries on September 3, 2024 and sell it today you would earn a total of 4,811 from holding Mueller Industries or generate 147.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mueller Industries vs. AZZ Incorporated
Performance |
| Timeline |
| Mueller Industries |
| AZZ Incorporated |
Mueller Industries and AZZ Incorporated Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mueller Industries and AZZ Incorporated
The main advantage of trading using opposite Mueller Industries and AZZ Incorporated positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mueller Industries position performs unexpectedly, AZZ Incorporated 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 AZZ Incorporated will offset losses from the drop in AZZ Incorporated's long position.| Mueller Industries vs. Insteel Industries | Mueller Industries vs. Carpenter Technology | Mueller Industries vs. Northwest Pipe | Mueller Industries vs. Ryerson Holding Corp |
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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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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