Correlation Between Topbuild Corp and Quanta Services

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

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

Diversification Opportunities for Topbuild Corp and Quanta Services

0.64

Correlation Coefficient

Topbuild Corp  Quanta Services

Poor diversification

The 3 months correlation between Topbuild and Quanta is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Quanta Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanta Services 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 Quanta Services. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanta Services has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Quanta Services go up and down completely randomly.

Pair Corralation between Topbuild Corp and Quanta Services

Considering the 90-day investment horizon Topbuild Corp is expected to generate 0.62 times more return on investment than Quanta Services. However, Topbuild Corp is 1.62 times less risky than Quanta Services. It trades about 0.01 of its potential returns per unit of risk. Quanta Services is currently generating about -0.09 per unit of risk. If you would invest  31,091  in Topbuild Corp on December 29, 2024 and sell it today you would earn a total of  10.00  from holding Topbuild Corp or generate 0.03% return on investment over 90 days.

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

Topbuild Corp  vs.  Quanta Services

Topbuild Corp

Risk-Adjusted Performance

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 rather sound essential indicators, Topbuild Corp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Quanta Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanta Services has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Topbuild Corp and Quanta Services

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

The idea behind Topbuild Corp and Quanta Services 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.