Correlation Between Beacon Roofing and 26442RAD3

Can any of the company-specific risk be diversified away by investing in both Beacon Roofing and 26442RAD3 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 26442RAD3 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 DUKE ENERGY PROGRESS, you can compare the effects of market volatilities on Beacon Roofing and 26442RAD3 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 26442RAD3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and 26442RAD3.

Diversification Opportunities for Beacon Roofing and 26442RAD3

0.6

Correlation Coefficient

Beacon Roofing  26442RAD3

Poor diversification

The 3 months correlation between Beacon and 26442RAD3 is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and DUKE ENERGY PROGRESS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DUKE ENERGY PROGRESS 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 26442RAD3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DUKE ENERGY PROGRESS has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and 26442RAD3 go up and down completely randomly.

Pair Corralation between Beacon Roofing and 26442RAD3

Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 1.75 times more return on investment than 26442RAD3. However, Beacon Roofing is 1.75 times more volatile than DUKE ENERGY PROGRESS. It trades about 0.2 of its potential returns per unit of risk. DUKE ENERGY PROGRESS is currently generating about -0.08 per unit of risk. If you would invest  10,130  in Beacon Roofing Supply on December 24, 2024 and sell it today you would earn a total of  2,247  from holding Beacon Roofing Supply or generate 22.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.0%
Values	Daily Returns

Beacon Roofing Supply  vs.  DUKE ENERGY PROGRESS

Beacon Roofing Supply

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 15 (%) 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.

DUKE ENERGY PROGRESS

Risk-Adjusted Performance

Insignificant

Over the last 90 days DUKE ENERGY PROGRESS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26442RAD3 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beacon Roofing and 26442RAD3

The main advantage of trading using opposite Beacon Roofing and 26442RAD3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing position performs unexpectedly, 26442RAD3 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 26442RAD3 will offset losses from the drop in 26442RAD3's long position.

The idea behind Beacon Roofing Supply and DUKE ENERGY PROGRESS 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.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.