Correlation Between American Woodmark and Mohawk Industries

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

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

Diversification Opportunities for American Woodmark and Mohawk Industries

0.73

Correlation Coefficient

American Woodmark  Mohawk Industries

Poor diversification

The 3 months correlation between American and Mohawk is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding American Woodmark and Mohawk Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mohawk Industries and American Woodmark 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 American Woodmark are associated (or correlated) with Mohawk Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mohawk Industries has no effect on the direction of American Woodmark i.e., American Woodmark and Mohawk Industries go up and down completely randomly.

Pair Corralation between American Woodmark and Mohawk Industries

Given the investment horizon of 90 days American Woodmark is expected to under-perform the Mohawk Industries. In addition to that, American Woodmark is 1.25 times more volatile than Mohawk Industries. It trades about -0.19 of its total potential returns per unit of risk. Mohawk Industries is currently generating about -0.03 per unit of volatility. If you would invest  11,854  in Mohawk Industries on December 29, 2024 and sell it today you would lose (480.00) from holding Mohawk Industries or give up 4.05% of portfolio value over 90 days.

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

American Woodmark  vs.  Mohawk Industries

American Woodmark

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Woodmark has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Mohawk Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mohawk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Mohawk Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with American Woodmark and Mohawk Industries

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

The idea behind American Woodmark and Mohawk Industries 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.