Correlation Between Trex and Interface
Can any of the company-specific risk be diversified away by investing in both Trex and Interface 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 Interface into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trex Company and Interface, you can compare the effects of market volatilities on Trex and Interface 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 Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trex and Interface.
Diversification Opportunities for Trex and Interface
Weak diversification
The 3 months correlation between Trex and Interface is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Trex Company and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface 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 Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Trex i.e., Trex and Interface go up and down completely randomly.
Pair Corralation between Trex and Interface
Given the investment horizon of 90 days Trex is expected to generate 2.26 times less return on investment than Interface. But when comparing it to its historical volatility, Trex Company is 1.16 times less risky than Interface. It trades about 0.03 of its potential returns per unit of risk. Interface is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,177 in Interface on October 25, 2024 and sell it today you would earn a total of 1,265 from holding Interface or generate 107.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trex Company vs. Interface
Performance |
| Timeline |
| Trex Company |
| Interface |
Trex and Interface Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trex and Interface
The main advantage of trading using opposite Trex and Interface positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trex position performs unexpectedly, Interface 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 Interface will offset losses from the drop in Interface's long position.| Trex vs. Quanex Building Products | Trex vs. Armstrong World Industries | Trex vs. Gibraltar Industries | Trex vs. Apogee Enterprises |
| Interface vs. Atos SE | Interface vs. Deveron Corp | Interface vs. Appen Limited | Interface vs. Atos Origin SA |
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 Stocks Directory module to find actively traded stocks across global markets.
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