Correlation Between BlueLinx Holdings and Beacon Roofing

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

By analyzing existing cross correlation between BlueLinx Holdings and Beacon Roofing Supply, you can compare the effects of market volatilities on BlueLinx Holdings and Beacon Roofing 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 Beacon Roofing. Check out your portfolio center. Please also check ongoing floating volatility patterns of BlueLinx Holdings and Beacon Roofing.

Diversification Opportunities for BlueLinx Holdings and Beacon Roofing

-0.34

Correlation Coefficient

BlueLinx Holdings  Beacon Roofing

Very good diversification

The 3 months correlation between BlueLinx and Beacon is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BlueLinx Holdings and Beacon Roofing Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beacon Roofing Supply 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 Beacon Roofing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beacon Roofing Supply has no effect on the direction of BlueLinx Holdings i.e., BlueLinx Holdings and Beacon Roofing go up and down completely randomly.

Pair Corralation between BlueLinx Holdings and Beacon Roofing

Considering the 90-day investment horizon BlueLinx Holdings is expected to under-perform the Beacon Roofing. In addition to that, BlueLinx Holdings is 1.6 times more volatile than Beacon Roofing Supply. It trades about -0.16 of its total potential returns per unit of risk. Beacon Roofing Supply is currently generating about 0.22 per unit of volatility. If you would invest  9,954  in Beacon Roofing Supply on December 29, 2024 and sell it today you would earn a total of  2,432  from holding Beacon Roofing Supply or generate 24.43% return on investment over 90 days.

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

BlueLinx Holdings  vs.  Beacon Roofing Supply

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.

Beacon Roofing Supply

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Beacon Roofing displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BlueLinx Holdings and Beacon Roofing

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

The idea behind BlueLinx Holdings and Beacon Roofing Supply 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.