Correlation Between Topbuild Corp and Ameresco

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

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

Diversification Opportunities for Topbuild Corp and Ameresco

0.68

Correlation Coefficient

Topbuild Corp  Ameresco

Poor diversification

The 3 months correlation between Topbuild and Ameresco is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Ameresco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameresco 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 Ameresco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameresco has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Ameresco go up and down completely randomly.

Pair Corralation between Topbuild Corp and Ameresco

Considering the 90-day investment horizon Topbuild Corp is expected to generate 0.98 times more return on investment than Ameresco. However, Topbuild Corp is 1.02 times less risky than Ameresco. It trades about -0.07 of its potential returns per unit of risk. Ameresco is currently generating about -0.09 per unit of risk. If you would invest  36,322  in Topbuild Corp on September 15, 2024 and sell it today you would lose (1,895) from holding Topbuild Corp or give up 5.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Topbuild Corp  vs.  Ameresco

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 latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Ameresco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameresco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic 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.

Pair Trading with Topbuild Corp and Ameresco

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

The idea behind Topbuild Corp and Ameresco 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.