Correlation Between Trane Technologies and Owens Corning
Can any of the company-specific risk be diversified away by investing in both Trane Technologies and Owens Corning 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 Owens Corning 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 Owens Corning, you can compare the effects of market volatilities on Trane Technologies and Owens Corning 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 Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trane Technologies and Owens Corning.
Diversification Opportunities for Trane Technologies and Owens Corning
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Trane and Owens is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Trane Technologies plc and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Trane Technologies i.e., Trane Technologies and Owens Corning go up and down completely randomly.
Pair Corralation between Trane Technologies and Owens Corning
Allowing for the 90-day total investment horizon Trane Technologies plc is expected to under-perform the Owens Corning. In addition to that, Trane Technologies is 1.23 times more volatile than Owens Corning. It trades about -0.12 of its total potential returns per unit of risk. Owens Corning is currently generating about 0.23 per unit of volatility. If you would invest 17,120 in Owens Corning on November 5, 2024 and sell it today you would earn a total of 1,335 from holding Owens Corning or generate 7.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Trane Technologies plc vs. Owens Corning
Performance |
| Timeline |
| Trane Technologies plc |
| Owens Corning |
Trane Technologies and Owens Corning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Trane Technologies and Owens Corning
The main advantage of trading using opposite Trane Technologies and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trane Technologies position performs unexpectedly, Owens Corning 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 Owens Corning will offset losses from the drop in Owens Corning'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 |
| Owens Corning vs. Trane Technologies plc | Owens Corning vs. Masco | Owens Corning vs. Quanex Building Products | Owens Corning vs. Jeld Wen Holding |
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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.
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