Correlation Between Quanex Building and Armstrong World
Can any of the company-specific risk be diversified away by investing in both Quanex Building and Armstrong World 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 Quanex Building and Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Quanex Building Products and Armstrong World Industries, you can compare the effects of market volatilities on Quanex Building and Armstrong World 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 Quanex Building with a short position of Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanex Building and Armstrong World.
Diversification Opportunities for Quanex Building and Armstrong World
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Quanex and Armstrong is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Quanex Building 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 Quanex Building Products are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Quanex Building i.e., Quanex Building and Armstrong World go up and down completely randomly.
Pair Corralation between Quanex Building and Armstrong World
Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the Armstrong World. In addition to that, Quanex Building is 2.06 times more volatile than Armstrong World Industries. It trades about -0.01 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about 0.12 per unit of volatility. If you would invest 11,979 in Armstrong World Industries on August 27, 2024 and sell it today you would earn a total of 3,929 from holding Armstrong World Industries or generate 32.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Quanex Building Products vs. Armstrong World Industries
Performance |
| Timeline |
| Quanex Building Products |
| Armstrong World Indu |
Quanex Building and Armstrong World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quanex Building and Armstrong World
The main advantage of trading using opposite Quanex Building and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building position performs unexpectedly, Armstrong World 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 Armstrong World will offset losses from the drop in Armstrong World's long position.| Quanex Building vs. Trex Company | Quanex Building vs. Gibraltar Industries | Quanex Building vs. Travis Perkins PLC | Quanex Building vs. Janus International Group |
| Armstrong World vs. Trex Company | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Travis Perkins PLC | Armstrong World vs. Janus International Group |
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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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