Correlation Between BlueLinx Holdings and Applied Industrial

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

By analyzing existing cross correlation between BlueLinx Holdings and Applied Industrial Technologies, you can compare the effects of market volatilities on BlueLinx Holdings and Applied Industrial 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 BlueLinx Holdings with a short position of Applied Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueLinx Holdings and Applied Industrial.

Diversification Opportunities for BlueLinx Holdings and Applied Industrial

0.66

Correlation Coefficient

BlueLinx Holdings  Applied Industrial

Poor diversification

The 3 months correlation between BlueLinx and Applied is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding BlueLinx Holdings and Applied Industrial Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Industrial and BlueLinx Holdings 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 BlueLinx Holdings are associated (or correlated) with Applied Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Industrial has no effect on the direction of BlueLinx Holdings i.e., BlueLinx Holdings and Applied Industrial go up and down completely randomly.

Pair Corralation between BlueLinx Holdings and Applied Industrial

Considering the 90-day investment horizon BlueLinx Holdings is expected to under-perform the Applied Industrial. In addition to that, BlueLinx Holdings is 1.43 times more volatile than Applied Industrial Technologies. It trades about -0.16 of its total potential returns per unit of risk. Applied Industrial Technologies is currently generating about -0.01 per unit of volatility. If you would invest  23,824  in Applied Industrial Technologies on December 29, 2024 and sell it today you would lose (602.00) from holding Applied Industrial Technologies or give up 2.53% of portfolio value over 90 days.

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

BlueLinx Holdings  vs.  Applied Industrial Technologie

BlueLinx Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days BlueLinx Holdings 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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Applied Industrial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with BlueLinx Holdings and Applied Industrial

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

The idea behind BlueLinx Holdings and Applied Industrial Technologies 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.

Check out your portfolio center.

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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.