Correlation Between Armstrong World and Azek
Can any of the company-specific risk be diversified away by investing in both Armstrong World and Azek 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 Armstrong World and Azek into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armstrong World Industries and Azek Company, you can compare the effects of market volatilities on Armstrong World and Azek 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 Armstrong World with a short position of Azek. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and Azek.
Diversification Opportunities for Armstrong World and Azek
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Armstrong and Azek is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and Armstrong World 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 Armstrong World Industries are associated (or correlated) with Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Armstrong World i.e., Armstrong World and Azek go up and down completely randomly.
Pair Corralation between Armstrong World and Azek
Considering the 90-day investment horizon Armstrong World Industries is expected to under-perform the Azek. But the stock apears to be less risky and, when comparing its historical volatility, Armstrong World Industries is 1.91 times less risky than Azek. The stock trades about -0.01 of its potential returns per unit of risk. The Azek Company is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,797 in Azek Company on December 28, 2024 and sell it today you would earn a total of 182.00 from holding Azek Company or generate 3.79% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.36% |
Values | Daily Returns |
Armstrong World Industries vs. Azek Company
Performance |
Timeline |
Armstrong World Indu |
Azek Company |
Armstrong World and Azek Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Armstrong World and Azek
The main advantage of trading using opposite Armstrong World and Azek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong World position performs unexpectedly, Azek 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 Azek will offset losses from the drop in Azek's long position.Armstrong World vs. Quanex Building Products | Armstrong World vs. Gibraltar Industries | Armstrong World vs. Beacon Roofing Supply | Armstrong World vs. Janus International Group |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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