Correlation Between Beacon Roofing and Perma Pipe

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

By analyzing existing cross correlation between Beacon Roofing Supply and Perma Pipe International Holdings, you can compare the effects of market volatilities on Beacon Roofing and Perma Pipe 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 Beacon Roofing with a short position of Perma Pipe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and Perma Pipe.

Diversification Opportunities for Beacon Roofing and Perma Pipe

-0.13

Correlation Coefficient

Beacon Roofing  Perma Pipe

Good diversification

The 3 months correlation between Beacon and Perma is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and Perma Pipe International Holdi in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perma Pipe Internati and Beacon Roofing 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 Beacon Roofing Supply are associated (or correlated) with Perma Pipe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perma Pipe Internati has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and Perma Pipe go up and down completely randomly.

Pair Corralation between Beacon Roofing and Perma Pipe

Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 0.56 times more return on investment than Perma Pipe. However, Beacon Roofing Supply is 1.78 times less risky than Perma Pipe. It trades about 0.22 of its potential returns per unit of risk. Perma Pipe International Holdings is currently generating about -0.05 per unit of risk. If you would invest  9,954  in Beacon Roofing Supply on December 28, 2024 and sell it today you would earn a total of  2,427  from holding Beacon Roofing Supply or generate 24.38% return on investment over 90 days.

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

Beacon Roofing Supply  vs.  Perma Pipe International Holdi

Beacon Roofing Supply

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Beacon Roofing displayed solid returns over the last few months and may actually be approaching a breakup point.

Perma Pipe Internati

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perma Pipe International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Beacon Roofing and Perma Pipe

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

The idea behind Beacon Roofing Supply and Perma Pipe International Holdings 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.