Correlation Between Montana Technologies and Owens Corning

Can any of the company-specific risk be diversified away by investing in both Montana 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 Montana 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 Montana Technologies and Owens Corning, you can compare the effects of market volatilities on Montana 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 Montana Technologies with a short position of Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Montana Technologies and Owens Corning.

Diversification Opportunities for Montana Technologies and Owens Corning

0.2

Correlation Coefficient

Montana Technologies  Owens Corning

Modest diversification

The 3 months correlation between Montana and Owens is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Montana Technologies and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning and Montana 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 Montana Technologies 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 Montana Technologies i.e., Montana Technologies and Owens Corning go up and down completely randomly.

Pair Corralation between Montana Technologies and Owens Corning

Assuming the 90 days horizon Montana Technologies is expected to generate 5.25 times more return on investment than Owens Corning. However, Montana Technologies is 5.25 times more volatile than Owens Corning. It trades about 0.43 of its potential returns per unit of risk. Owens Corning is currently generating about -0.28 per unit of risk. If you would invest  65.00  in Montana Technologies on September 21, 2024 and sell it today you would earn a total of  84.00  from holding Montana Technologies or generate 129.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Montana Technologies  vs.  Owens Corning

Montana Technologies

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Montana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Owens Corning

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Owens Corning is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Montana Technologies and Owens Corning

The main advantage of trading using opposite Montana Technologies and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montana 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.

The idea behind Montana Technologies and Owens Corning 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.