Correlation Between Alpha Pro and Trex

Can any of the company-specific risk be diversified away by investing in both Alpha Pro and Trex 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 Trex 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 Trex Company, you can compare the effects of market volatilities on Alpha Pro and Trex 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 Trex. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Pro and Trex.

Diversification Opportunities for Alpha Pro and Trex

-0.67

Correlation Coefficient

Alpha Pro  Trex

Excellent diversification

The 3 months correlation between Alpha and Trex is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Pro Tech and Trex Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trex Company 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 Trex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trex Company has no effect on the direction of Alpha Pro i.e., Alpha Pro and Trex go up and down completely randomly.

Pair Corralation between Alpha Pro and Trex

Considering the 90-day investment horizon Alpha Pro Tech is expected to under-perform the Trex. In addition to that, Alpha Pro is 1.49 times more volatile than Trex Company. It trades about -0.09 of its total potential returns per unit of risk. Trex Company is currently generating about 0.19 per unit of volatility. If you would invest  7,054  in Trex Company on September 5, 2024 and sell it today you would earn a total of  658.00  from holding Trex Company or generate 9.33% return on investment over 90 days.

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

Alpha Pro Tech  vs.  Trex Company

Alpha Pro Tech

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Trex Company

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trex Company are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Trex showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha Pro and Trex

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

The idea behind Alpha Pro Tech and Trex Company 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.