Correlation Between SPX Corp and Installed Building
Can any of the company-specific risk be diversified away by investing in both SPX Corp and Installed Building 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 SPX Corp and Installed Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SPX Corp and Installed Building Products, you can compare the effects of market volatilities on SPX Corp and Installed Building 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 SPX Corp with a short position of Installed Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of SPX Corp and Installed Building.
Diversification Opportunities for SPX Corp and Installed Building
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between SPX and Installed is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding SPX Corp and Installed Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Installed Building and SPX Corp 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 SPX Corp are associated (or correlated) with Installed Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Installed Building has no effect on the direction of SPX Corp i.e., SPX Corp and Installed Building go up and down completely randomly.
Pair Corralation between SPX Corp and Installed Building
Given the investment horizon of 90 days SPX Corp is expected to generate 1.05 times more return on investment than Installed Building. However, SPX Corp is 1.05 times more volatile than Installed Building Products. It trades about 0.15 of its potential returns per unit of risk. Installed Building Products is currently generating about 0.08 per unit of risk. If you would invest 15,925 in SPX Corp on August 30, 2024 and sell it today you would earn a total of 1,575 from holding SPX Corp or generate 9.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
SPX Corp vs. Installed Building Products
Performance |
| Timeline |
| SPX Corp |
| Installed Building |
SPX Corp and Installed Building Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SPX Corp and Installed Building
The main advantage of trading using opposite SPX Corp and Installed Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SPX Corp position performs unexpectedly, Installed Building 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 Installed Building will offset losses from the drop in Installed Building's long position.| SPX Corp vs. Standex International | SPX Corp vs. Enpro Industries | SPX Corp vs. Thermon Group Holdings | SPX Corp vs. Enerpac Tool Group |
| Installed Building vs. Century Communities | Installed Building vs. MI Homes | Installed Building vs. Taylor Morn Home | Installed Building vs. TRI Pointe Homes |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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