Correlation Between AZZ Incorporated and RB Global

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

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

Diversification Opportunities for AZZ Incorporated and RB Global

0.88

Correlation Coefficient

AZZ Incorporated  RB Global

Very poor diversification

The 3 months correlation between AZZ and RBA is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and RB Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RB Global and AZZ Incorporated 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 AZZ Incorporated are associated (or correlated) with RB Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RB Global has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and RB Global go up and down completely randomly.

Pair Corralation between AZZ Incorporated and RB Global

Considering the 90-day investment horizon AZZ Incorporated is expected to generate 1.2 times more return on investment than RB Global. However, AZZ Incorporated is 1.2 times more volatile than RB Global. It trades about 0.08 of its potential returns per unit of risk. RB Global is currently generating about 0.06 per unit of risk. If you would invest  4,243  in AZZ Incorporated on October 25, 2024 and sell it today you would earn a total of  4,546  from holding AZZ Incorporated or generate 107.14% return on investment over 90 days.

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

AZZ Incorporated  vs.  RB Global

AZZ Incorporated

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated showed solid returns over the last few months and may actually be approaching a breakup point.

RB Global

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, RB Global is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with AZZ Incorporated and RB Global

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

The idea behind AZZ Incorporated and RB Global 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.