Correlation Between Trex and Gibraltar Industries
Can any of the company-specific risk be diversified away by investing in both Trex and Gibraltar Industries 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 Trex and Gibraltar Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trex Company and Gibraltar Industries, you can compare the effects of market volatilities on Trex and Gibraltar Industries 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 Trex with a short position of Gibraltar Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trex and Gibraltar Industries.
Diversification Opportunities for Trex and Gibraltar Industries
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trex and Gibraltar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Trex Company and Gibraltar Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibraltar Industries and Trex 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 Trex Company are associated (or correlated) with Gibraltar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibraltar Industries has no effect on the direction of Trex i.e., Trex and Gibraltar Industries go up and down completely randomly.
Pair Corralation between Trex and Gibraltar Industries
Given the investment horizon of 90 days Trex Company is expected to under-perform the Gibraltar Industries. In addition to that, Trex is 1.34 times more volatile than Gibraltar Industries. It trades about -0.03 of its total potential returns per unit of risk. Gibraltar Industries is currently generating about -0.01 per unit of volatility. If you would invest 7,745 in Gibraltar Industries on August 27, 2024 and sell it today you would lose (642.00) from holding Gibraltar Industries or give up 8.29% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trex Company vs. Gibraltar Industries
Performance |
| Timeline |
| Trex Company |
| Gibraltar Industries |
Trex and Gibraltar Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trex and Gibraltar Industries
The main advantage of trading using opposite Trex and Gibraltar Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trex position performs unexpectedly, Gibraltar Industries 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 Gibraltar Industries will offset losses from the drop in Gibraltar Industries' long position.| Trex vs. Quanex Building Products | Trex vs. Armstrong World Industries | Trex vs. Gibraltar Industries | Trex vs. Apogee Enterprises |
| Gibraltar Industries vs. Quanex Building Products | Gibraltar Industries vs. Jeld Wen Holding | Gibraltar Industries vs. Perma Pipe International Holdings | Gibraltar Industries vs. Interface |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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