Correlation Between Quanex Building and Limbach Holdings
Can any of the company-specific risk be diversified away by investing in both Quanex Building and Limbach Holdings 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 Limbach Holdings 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 Limbach Holdings, you can compare the effects of market volatilities on Quanex Building and Limbach Holdings 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 Limbach Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanex Building and Limbach Holdings.
Diversification Opportunities for Quanex Building and Limbach Holdings
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Quanex and Limbach is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and Limbach Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Limbach Holdings 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 Limbach Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Limbach Holdings has no effect on the direction of Quanex Building i.e., Quanex Building and Limbach Holdings go up and down completely randomly.
Pair Corralation between Quanex Building and Limbach Holdings
Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the Limbach Holdings. In addition to that, Quanex Building is 1.31 times more volatile than Limbach Holdings. It trades about -0.04 of its total potential returns per unit of risk. Limbach Holdings is currently generating about 0.04 per unit of volatility. If you would invest 7,630 in Limbach Holdings on January 11, 2025 and sell it today you would earn a total of 135.00 from holding Limbach Holdings or generate 1.77% 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. Limbach Holdings
Performance |
| Timeline |
| Quanex Building Products |
| Limbach Holdings |
Quanex Building and Limbach Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Quanex Building and Limbach Holdings
The main advantage of trading using opposite Quanex Building and Limbach Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building position performs unexpectedly, Limbach Holdings 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 Limbach Holdings will offset losses from the drop in Limbach Holdings' long position.| Quanex Building vs. Fortune Brands Innovations | Quanex Building vs. Johnson Controls International | Quanex Building vs. Lennox International | Quanex Building vs. Builders FirstSource |
| Limbach Holdings vs. MYR Group | Limbach Holdings vs. Granite Construction Incorporated | Limbach Holdings vs. Construction Partners | Limbach Holdings vs. Great Lakes Dredge |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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