Correlation Between Intrusion and Beacon Roofing

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

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

Diversification Opportunities for Intrusion and Beacon Roofing

0.08

Correlation Coefficient

Intrusion  Beacon Roofing

Significant diversification

The 3 months correlation between Intrusion and Beacon is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Intrusion 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 Intrusion 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 Intrusion 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 Intrusion i.e., Intrusion and Beacon Roofing go up and down completely randomly.

Pair Corralation between Intrusion and Beacon Roofing

Given the investment horizon of 90 days Intrusion is expected to generate 23.59 times more return on investment than Beacon Roofing. However, Intrusion is 23.59 times more volatile than Beacon Roofing Supply. It trades about 0.14 of its potential returns per unit of risk. Beacon Roofing Supply is currently generating about 0.16 per unit of risk. If you would invest  73.00  in Intrusion on October 24, 2024 and sell it today you would earn a total of  158.00  from holding Intrusion or generate 216.44% return on investment over 90 days.

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

Intrusion  vs.  Beacon Roofing Supply

Intrusion

Risk-Adjusted Performance

10 of 100

OK

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

Beacon Roofing Supply

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 12 (%) 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 Intrusion and Beacon Roofing

The main advantage of trading using opposite Intrusion and Beacon Roofing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intrusion 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 Intrusion 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.