Correlation Between Beacon Roofing and 465685AH8

Can any of the company-specific risk be diversified away by investing in both Beacon Roofing and 465685AH8 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 465685AH8 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 ITC HLDGS P, you can compare the effects of market volatilities on Beacon Roofing and 465685AH8 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 465685AH8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and 465685AH8.

Diversification Opportunities for Beacon Roofing and 465685AH8

-0.09

Correlation Coefficient

Beacon Roofing  465685AH8

Good diversification

The 3 months correlation between Beacon and 465685AH8 is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and ITC HLDGS P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ITC HLDGS P 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 465685AH8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ITC HLDGS P has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and 465685AH8 go up and down completely randomly.

Pair Corralation between Beacon Roofing and 465685AH8

Given the investment horizon of 90 days Beacon Roofing is expected to generate 85.92 times less return on investment than 465685AH8. But when comparing it to its historical volatility, Beacon Roofing Supply is 59.15 times less risky than 465685AH8. It trades about 0.07 of its potential returns per unit of risk. ITC HLDGS P is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  9,691  in ITC HLDGS P on October 10, 2024 and sell it today you would lose (931.00) from holding ITC HLDGS P or give up 9.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.41%
Values	Daily Returns

Beacon Roofing Supply  vs.  ITC HLDGS P

Beacon Roofing Supply

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 8 (%) 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.

ITC HLDGS P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ITC HLDGS P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for ITC HLDGS P investors.

Pair Trading with Beacon Roofing and 465685AH8

The main advantage of trading using opposite Beacon Roofing and 465685AH8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beacon Roofing position performs unexpectedly, 465685AH8 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 465685AH8 will offset losses from the drop in 465685AH8's long position.

The idea behind Beacon Roofing Supply and ITC HLDGS P 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 Global Correlations module to find global opportunities by holding instruments from different markets.