Correlation Between Trane Technologies and Beacon Roofing

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Can any of the company-specific risk be diversified away by investing in both Trane Technologies and Beacon Roofing 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 Beacon Roofing 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 Beacon Roofing Supply, you can compare the effects of market volatilities on Trane Technologies and Beacon Roofing 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 Beacon Roofing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Beacon Roofing.

Diversification Opportunities for Trane Technologies and Beacon Roofing

TraneBeaconDiversified AwayTraneBeaconDiversified Away100%
-0.24
  Correlation Coefficient

Very good diversification

The 3 months correlation between Trane and Beacon is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Beacon Roofing Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beacon Roofing Supply 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 Beacon Roofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beacon Roofing Supply has no effect on the direction of Trane Technologies i.e., Trane Technologies and Beacon Roofing go up and down completely randomly.

Pair Corralation between Trane Technologies and Beacon Roofing

Allowing for the 90-day total investment horizon Trane Technologies plc is expected to under-perform the Beacon Roofing. In addition to that, Trane Technologies is 1.45 times more volatile than Beacon Roofing Supply. It trades about -0.16 of its total potential returns per unit of risk. Beacon Roofing Supply is currently generating about -0.17 per unit of volatility. If you would invest  11,927  in Beacon Roofing Supply on November 29, 2024 and sell it today you would lose (367.00) from holding Beacon Roofing Supply or give up 3.08% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Trane Technologies plc  vs.  Beacon Roofing Supply

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -10-50510
JavaScript chart by amCharts 3.21.15TT BECN
       Timeline  
Trane Technologies plc 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Trane Technologies plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb340350360370380390400410420
Beacon Roofing Supply 

Risk-Adjusted Performance

Weak

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Beacon Roofing is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb100105110115120

Trane Technologies and Beacon Roofing Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.64-2.0-1.37-0.73-0.09860.471.051.632.212.79 0.060.080.100.120.140.16
JavaScript chart by amCharts 3.21.15TT BECN
       Returns  

Pair Trading with Trane Technologies and Beacon Roofing

The main advantage of trading using opposite Trane Technologies and Beacon Roofing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies position performs unexpectedly, Beacon Roofing 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 Beacon Roofing will offset losses from the drop in Beacon Roofing's long position.
The idea behind Trane Technologies plc and Beacon Roofing Supply pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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