Correlation Between NYSE Composite and Armstrong World
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Armstrong World Industries, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Armstrong World.
Diversification Opportunities for NYSE Composite and Armstrong World
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NYSE and Armstrong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite 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 NYSE Composite 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 NYSE Composite 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 NYSE Composite i.e., NYSE Composite and Armstrong World go up and down completely randomly.
Pair Corralation between NYSE Composite and Armstrong World
Assuming the 90 days trading horizon NYSE Composite is expected to generate 3.09 times less return on investment than Armstrong World. But when comparing it to its historical volatility, NYSE Composite is 2.14 times less risky than Armstrong World. It trades about 0.08 of its potential returns per unit of risk. Armstrong World Industries is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 7,008 in Armstrong World Industries on August 27, 2024 and sell it today you would earn a total of 8,900 from holding Armstrong World Industries or generate 127.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Armstrong World Industries
Performance |
| Timeline |
NYSE Composite and Armstrong World Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Armstrong World Industries
Pair trading matchups for Armstrong World
Pair Trading with NYSE Composite and Armstrong World
The main advantage of trading using opposite NYSE Composite and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. Hooker Furniture | NYSE Composite vs. Hudson Pacific Properties | NYSE Composite vs. Canlan Ice Sports | NYSE Composite vs. Boston Properties |
| Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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