Correlation Between DXP Enterprises and BlueLinx Holdings

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

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

Diversification Opportunities for DXP Enterprises and BlueLinx Holdings

0.89

Correlation Coefficient

DXP Enterprises  BlueLinx Holdings

Very poor diversification

The 3 months correlation between DXP and BlueLinx is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and BlueLinx Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueLinx Holdings and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with BlueLinx Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueLinx Holdings has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and BlueLinx Holdings go up and down completely randomly.

Pair Corralation between DXP Enterprises and BlueLinx Holdings

Given the investment horizon of 90 days DXP Enterprises is expected to generate 1.31 times more return on investment than BlueLinx Holdings. However, DXP Enterprises is 1.31 times more volatile than BlueLinx Holdings. It trades about 0.14 of its potential returns per unit of risk. BlueLinx Holdings is currently generating about 0.14 per unit of risk. If you would invest  5,500  in DXP Enterprises on August 30, 2024 and sell it today you would earn a total of  1,793  from holding DXP Enterprises or generate 32.6% return on investment over 90 days.

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

DXP Enterprises  vs.  BlueLinx Holdings

DXP Enterprises

Risk-Adjusted Performance

11 of 100

Good

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

BlueLinx Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BlueLinx Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BlueLinx Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DXP Enterprises and BlueLinx Holdings

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

The idea behind DXP Enterprises and BlueLinx Holdings 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 Stocks Directory module to find actively traded stocks across global markets.