Correlation Between Topbuild Corp and Lead Real

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

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

Diversification Opportunities for Topbuild Corp and Lead Real

-0.21

Correlation Coefficient

Topbuild Corp  Lead Real

Very good diversification

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

Pair Corralation between Topbuild Corp and Lead Real

Considering the 90-day investment horizon Topbuild Corp is expected to generate 0.35 times more return on investment than Lead Real. However, Topbuild Corp is 2.88 times less risky than Lead Real. It trades about 0.03 of its potential returns per unit of risk. Lead Real Estate is currently generating about -0.01 per unit of risk. If you would invest  26,901  in Topbuild Corp on October 8, 2024 and sell it today you would earn a total of  4,751  from holding Topbuild Corp or generate 17.66% return on investment over 90 days.

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

Topbuild Corp  vs.  Lead Real Estate

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 fragile performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Lead Real Estate

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lead Real Estate are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Lead Real exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topbuild Corp and Lead Real

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

The idea behind Topbuild Corp and Lead Real Estate 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.