Correlation Between Alpha Pro and Armstrong World

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

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

Diversification Opportunities for Alpha Pro and Armstrong World

0.15

Correlation Coefficient

Alpha Pro  Armstrong World

Average diversification

The 3 months correlation between Alpha and Armstrong is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Pro Tech and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Alpha Pro 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 Alpha Pro Tech are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Alpha Pro i.e., Alpha Pro and Armstrong World go up and down completely randomly.

Pair Corralation between Alpha Pro and Armstrong World

Considering the 90-day investment horizon Alpha Pro Tech is expected to under-perform the Armstrong World. In addition to that, Alpha Pro is 1.22 times more volatile than Armstrong World Industries. It trades about -0.02 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about 0.03 per unit of volatility. If you would invest  14,162  in Armstrong World Industries on December 28, 2024 and sell it today you would earn a total of  265.00  from holding Armstrong World Industries or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Alpha Pro Tech  vs.  Armstrong World Industries

Alpha Pro Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Pro Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Pro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Armstrong World Indu

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Armstrong World Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Armstrong World is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Alpha Pro and Armstrong World

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

The idea behind Alpha Pro Tech and Armstrong World 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.