Correlation Between Masonite International and Interface

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

By analyzing existing cross correlation between Masonite International Corp and Interface, you can compare the effects of market volatilities on Masonite International and Interface 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 Masonite International with a short position of Interface. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masonite International and Interface.

Diversification Opportunities for Masonite International and Interface

0.67

Correlation Coefficient

Masonite International  Interface

Poor diversification

The 3 months correlation between Masonite and Interface is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Masonite International Corp and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface and Masonite International 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 Masonite International Corp are associated (or correlated) with Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Masonite International i.e., Masonite International and Interface go up and down completely randomly.

Pair Corralation between Masonite International and Interface

If you would invest  1,823  in Interface on August 31, 2024 and sell it today you would earn a total of  829.00  from holding Interface or generate 45.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Masonite International Corp  vs.  Interface

Masonite International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masonite International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Masonite International is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Interface

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Interface are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Interface exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masonite International and Interface

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

The idea behind Masonite International Corp and Interface 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..