Correlation Between Azek and Alpha Pro

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

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

Diversification Opportunities for Azek and Alpha Pro

-0.44

Correlation Coefficient

Azek  Alpha Pro

Very good diversification

The 3 months correlation between Azek and Alpha is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Azek 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 Azek Company are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Azek i.e., Azek and Alpha Pro go up and down completely randomly.

Pair Corralation between Azek and Alpha Pro

Given the investment horizon of 90 days Azek Company is expected to under-perform the Alpha Pro. But the stock apears to be less risky and, when comparing its historical volatility, Azek Company is 1.14 times less risky than Alpha Pro. The stock trades about -0.09 of its potential returns per unit of risk. The Alpha Pro Tech is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  522.00  in Alpha Pro Tech on December 3, 2024 and sell it today you would earn a total of  18.00  from holding Alpha Pro Tech or generate 3.45% return on investment over 90 days.

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

Azek Company  vs.  Alpha Pro Tech

Azek Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azek Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Alpha Pro Tech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Pro Tech are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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.

Pair Trading with Azek and Alpha Pro

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

The idea behind Azek Company and Alpha Pro Tech 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..