Correlation Between Great Lakes and Topbuild Corp

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Can any of the company-specific risk be diversified away by investing in both Great Lakes and Topbuild Corp 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 Great Lakes and Topbuild Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Great Lakes Dredge and Topbuild Corp, you can compare the effects of market volatilities on Great Lakes and Topbuild Corp 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 Great Lakes with a short position of Topbuild Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Lakes and Topbuild Corp.

Diversification Opportunities for Great Lakes and Topbuild Corp

-0.16
  Correlation Coefficient

Good diversification

The 3 months correlation between Great and Topbuild is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Great Lakes Dredge and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and Great Lakes 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 Great Lakes Dredge are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Great Lakes i.e., Great Lakes and Topbuild Corp go up and down completely randomly.

Pair Corralation between Great Lakes and Topbuild Corp

Given the investment horizon of 90 days Great Lakes is expected to generate 1.09 times less return on investment than Topbuild Corp. But when comparing it to its historical volatility, Great Lakes Dredge is 1.4 times less risky than Topbuild Corp. It trades about 0.2 of its potential returns per unit of risk. Topbuild Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  35,597  in Topbuild Corp on August 31, 2024 and sell it today you would earn a total of  3,403  from holding Topbuild Corp or generate 9.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Great Lakes Dredge  vs.  Topbuild Corp

 Performance 
       Timeline  
Great Lakes Dredge 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Great Lakes Dredge are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Great Lakes exhibited solid returns over the last few months and may actually be approaching a breakup point.
Topbuild Corp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Very Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Topbuild Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Topbuild Corp may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Great Lakes and Topbuild Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Great Lakes and Topbuild Corp

The main advantage of trading using opposite Great Lakes and Topbuild Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Lakes position performs unexpectedly, Topbuild Corp 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 Topbuild Corp will offset losses from the drop in Topbuild Corp's long position.
The idea behind Great Lakes Dredge and Topbuild Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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