Correlation Between Trane Technologies and Armstrong World
Can any of the company-specific risk be diversified away by investing in both Trane Technologies 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 Trane Technologies and Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Trane Technologies plc and Armstrong World Industries, you can compare the effects of market volatilities on Trane Technologies 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 Trane Technologies with a short position of Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Armstrong World.
Diversification Opportunities for Trane Technologies and Armstrong World
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Trane and Armstrong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc 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 Trane Technologies 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 Trane Technologies plc 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 Trane Technologies i.e., Trane Technologies and Armstrong World go up and down completely randomly.
Pair Corralation between Trane Technologies and Armstrong World
Allowing for the 90-day total investment horizon Trane Technologies is expected to generate 2.6 times less return on investment than Armstrong World. In addition to that, Trane Technologies is 1.13 times more volatile than Armstrong World Industries. It trades about 0.14 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about 0.43 per unit of volatility. If you would invest 13,790 in Armstrong World Industries on August 24, 2024 and sell it today you would earn a total of 1,919 from holding Armstrong World Industries or generate 13.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trane Technologies plc vs. Armstrong World Industries
Performance |
| Timeline |
| Trane Technologies plc |
| Armstrong World Indu |
Trane Technologies and Armstrong World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trane Technologies and Armstrong World
The main advantage of trading using opposite Trane Technologies and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies 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.| Trane Technologies vs. Fortune Brands Innovations | Trane Technologies vs. Johnson Controls International | Trane Technologies vs. Lennox International | Trane Technologies vs. Builders FirstSource |
| 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Equity Forecasting Use basic forecasting models to generate price predictions and determine price momentum | |
| Aroon Oscillator Analyze current equity momentum using Aroon Oscillator and other momentum ratios | |
| Stocks Directory Find actively traded stocks across global markets | |
| Piotroski F Score Get Piotroski F Score based on the binary analysis strategy of nine different fundamentals | |
| Bonds Directory Find actively traded corporate debentures issued by US companies |