Correlation Between Installed Building and Skyline

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

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

Diversification Opportunities for Installed Building and Skyline

-0.07

Correlation Coefficient

Installed Building  Skyline

Good diversification

The 3 months correlation between Installed and Skyline is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Installed Building Products and Skyline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Skyline and Installed Building 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 Installed Building Products are associated (or correlated) with Skyline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Skyline has no effect on the direction of Installed Building i.e., Installed Building and Skyline go up and down completely randomly.

Pair Corralation between Installed Building and Skyline

Considering the 90-day investment horizon Installed Building is expected to generate 9.69 times less return on investment than Skyline. In addition to that, Installed Building is 1.54 times more volatile than Skyline. It trades about 0.01 of its total potential returns per unit of risk. Skyline is currently generating about 0.15 per unit of volatility. If you would invest  9,134  in Skyline on September 12, 2024 and sell it today you would earn a total of  1,604  from holding Skyline or generate 17.56% return on investment over 90 days.

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

Installed Building Products  vs.  Skyline

Installed Building

Risk-Adjusted Performance

0 of 100

Weak

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

Skyline

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Skyline are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating forward-looking signals, Skyline showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Installed Building and Skyline

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

The idea behind Installed Building Products and Skyline 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.