Correlation Between Latham and Azek
Can any of the company-specific risk be diversified away by investing in both Latham and Azek 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 Latham and Azek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Latham Group and Azek Company, you can compare the effects of market volatilities on Latham and Azek 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 Latham with a short position of Azek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Latham and Azek.
Diversification Opportunities for Latham and Azek
Weak diversification
The 3 months correlation between Latham and Azek is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Latham Group and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and Latham 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 Latham Group are associated (or correlated) with Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Latham i.e., Latham and Azek go up and down completely randomly.
Pair Corralation between Latham and Azek
Given the investment horizon of 90 days Latham Group is expected to generate 2.43 times more return on investment than Azek. However, Latham is 2.43 times more volatile than Azek Company. It trades about 0.04 of its potential returns per unit of risk. Azek Company is currently generating about 0.07 per unit of risk. If you would invest 440.00 in Latham Group on October 25, 2024 and sell it today you would earn a total of 265.00 from holding Latham Group or generate 60.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Latham Group vs. Azek Company
Performance |
| Timeline |
| Latham Group |
| Azek Company |
Latham and Azek Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Latham and Azek
The main advantage of trading using opposite Latham and Azek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Latham position performs unexpectedly, Azek 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 Azek will offset losses from the drop in Azek's long position.| Latham vs. Janus International Group | Latham vs. Quanex Building Products | Latham vs. GMS Inc | Latham vs. Gibraltar Industries |
| Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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