Correlation Between Topbuild Corp and Argan

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

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

Diversification Opportunities for Topbuild Corp and Argan

-0.54

Correlation Coefficient

Topbuild Corp  Argan

Excellent diversification

The 3 months correlation between Topbuild and Argan is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Argan Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Argan Inc 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 Argan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Argan Inc has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Argan go up and down completely randomly.

Pair Corralation between Topbuild Corp and Argan

Considering the 90-day investment horizon Topbuild Corp is expected to generate 1.9 times less return on investment than Argan. But when comparing it to its historical volatility, Topbuild Corp is 1.1 times less risky than Argan. It trades about 0.07 of its potential returns per unit of risk. Argan Inc is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,511  in Argan Inc on September 21, 2024 and sell it today you would earn a total of  10,437  from holding Argan Inc or generate 297.27% return on investment over 90 days.

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

Topbuild Corp  vs.  Argan Inc

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 uncertain 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.

Argan Inc

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Argan Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Argan showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topbuild Corp and Argan

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

The idea behind Topbuild Corp and Argan Inc 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.