Correlation Between Builders FirstSource and Alpha Pro

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

By analyzing existing cross correlation between Builders FirstSource and Alpha Pro Tech, you can compare the effects of market volatilities on Builders FirstSource and Alpha Pro 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 Builders FirstSource with a short position of Alpha Pro. Check out your portfolio center. Please also check ongoing floating volatility patterns of Builders FirstSource and Alpha Pro.

Diversification Opportunities for Builders FirstSource and Alpha Pro

0.35

Correlation Coefficient

Builders FirstSource  Alpha Pro

Weak diversification

The 3 months correlation between Builders and Alpha is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Builders FirstSource and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Builders FirstSource 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 Builders FirstSource are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Builders FirstSource i.e., Builders FirstSource and Alpha Pro go up and down completely randomly.

Pair Corralation between Builders FirstSource and Alpha Pro

Given the investment horizon of 90 days Builders FirstSource is expected to under-perform the Alpha Pro. In addition to that, Builders FirstSource is 1.19 times more volatile than Alpha Pro Tech. It trades about -0.08 of its total potential returns per unit of risk. Alpha Pro Tech is currently generating about 0.0 per unit of volatility. If you would invest  510.00  in Alpha Pro Tech on December 25, 2024 and sell it today you would lose (4.50) from holding Alpha Pro Tech or give up 0.88% of portfolio value over 90 days.

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

Builders FirstSource  vs.  Alpha Pro Tech

Builders FirstSource

Risk-Adjusted Performance

Very Weak

Over the last 90 days Builders FirstSource has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Alpha Pro Tech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpha Pro Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Pro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Builders FirstSource and Alpha Pro

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

The idea behind Builders FirstSource and Alpha Pro Tech 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.