Correlation Between Topbuild Corp and Atlantic American

Can any of the company-specific risk be diversified away by investing in both Topbuild Corp and Atlantic American 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 Topbuild Corp and Atlantic American into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Topbuild Corp and Atlantic American

0.21

Correlation Coefficient

Topbuild Corp  Atlantic American

Modest diversification

The 3 months correlation between Topbuild and Atlantic is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Atlantic American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atlantic American and Topbuild Corp 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 Topbuild Corp are associated (or correlated) with Atlantic American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atlantic American has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Atlantic American go up and down completely randomly.

Pair Corralation between Topbuild Corp and Atlantic American

Considering the 90-day investment horizon Topbuild Corp is expected to generate 0.75 times more return on investment than Atlantic American. However, Topbuild Corp is 1.34 times less risky than Atlantic American. It trades about 0.07 of its potential returns per unit of risk. Atlantic American is currently generating about -0.01 per unit of risk. If you would invest  15,792  in Topbuild Corp on September 24, 2024 and sell it today you would earn a total of  15,236  from holding Topbuild Corp or generate 96.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Topbuild Corp  vs.  Atlantic American

Topbuild Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Atlantic American

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Atlantic American has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Atlantic American is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Topbuild Corp and Atlantic American

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

The idea behind Topbuild Corp and Atlantic American 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.