Correlation Between Beacon Roofing and WILLIAMS

Can any of the company-specific risk be diversified away by investing in both Beacon Roofing and WILLIAMS 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 WILLIAMS 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 WILLIAMS INC 875, you can compare the effects of market volatilities on Beacon Roofing and WILLIAMS 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 WILLIAMS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beacon Roofing and WILLIAMS.

Diversification Opportunities for Beacon Roofing and WILLIAMS

0.01

Correlation Coefficient

Beacon Roofing  WILLIAMS

Significant diversification

The 3 months correlation between Beacon and WILLIAMS is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and WILLIAMS INC 875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WILLIAMS INC 875 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 WILLIAMS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WILLIAMS INC 875 has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and WILLIAMS go up and down completely randomly.

Pair Corralation between Beacon Roofing and WILLIAMS

Given the investment horizon of 90 days Beacon Roofing Supply is expected to generate 5.28 times more return on investment than WILLIAMS. However, Beacon Roofing is 5.28 times more volatile than WILLIAMS INC 875. It trades about 0.33 of its potential returns per unit of risk. WILLIAMS INC 875 is currently generating about 0.07 per unit of risk. If you would invest  10,132  in Beacon Roofing Supply on October 24, 2024 and sell it today you would earn a total of  1,473  from holding Beacon Roofing Supply or generate 14.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Beacon Roofing Supply  vs.  WILLIAMS INC 875

Beacon Roofing Supply

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 12 (%) 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.

WILLIAMS INC 875

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days WILLIAMS INC 875 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, WILLIAMS 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 WILLIAMS

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

The idea behind Beacon Roofing Supply and WILLIAMS INC 875 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.