Correlation Between Arcosa and Topbuild Corp

Can any of the company-specific risk be diversified away by investing in both Arcosa and Topbuild Corp 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 Arcosa and Topbuild Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Arcosa Inc and Topbuild Corp, you can compare the effects of market volatilities on Arcosa and Topbuild Corp 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 Arcosa with a short position of Topbuild Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcosa and Topbuild Corp.

Diversification Opportunities for Arcosa and Topbuild Corp

-0.11

Correlation Coefficient

Arcosa  Topbuild Corp

Good diversification

The 3 months correlation between Arcosa and Topbuild is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Arcosa Inc and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and Arcosa 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 Arcosa Inc are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Arcosa i.e., Arcosa and Topbuild Corp go up and down completely randomly.

Pair Corralation between Arcosa and Topbuild Corp

Considering the 90-day investment horizon Arcosa Inc is expected to generate 0.7 times more return on investment than Topbuild Corp. However, Arcosa Inc is 1.43 times less risky than Topbuild Corp. It trades about 0.21 of its potential returns per unit of risk. Topbuild Corp is currently generating about 0.04 per unit of risk. If you would invest  8,618  in Arcosa Inc on August 31, 2024 and sell it today you would earn a total of  2,119  from holding Arcosa Inc or generate 24.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Arcosa Inc  vs.  Topbuild Corp

Arcosa Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Arcosa Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Arcosa sustained solid returns over the last few months and may actually be approaching a breakup point.

Topbuild Corp

Risk-Adjusted Performance

3 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Topbuild Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Topbuild Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Arcosa and Topbuild Corp

The main advantage of trading using opposite Arcosa and Topbuild Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arcosa position performs unexpectedly, Topbuild Corp 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 Topbuild Corp will offset losses from the drop in Topbuild Corp's long position.

The idea behind Arcosa Inc and Topbuild Corp 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.