Correlation Between Janus International and Beacon Roofing

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

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

Diversification Opportunities for Janus International and Beacon Roofing

0.53

Correlation Coefficient

Janus International  Beacon Roofing

Very weak diversification

The 3 months correlation between Janus and Beacon is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Janus International Group 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 Janus 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 Janus International Group 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 Janus International i.e., Janus International and Beacon Roofing go up and down completely randomly.

Pair Corralation between Janus International and Beacon Roofing

Considering the 90-day investment horizon Janus International Group is expected to generate 1.55 times more return on investment than Beacon Roofing. However, Janus International is 1.55 times more volatile than Beacon Roofing Supply. It trades about 0.06 of its potential returns per unit of risk. Beacon Roofing Supply is currently generating about 0.04 per unit of risk. If you would invest  748.00  in Janus International Group on November 29, 2024 and sell it today you would earn a total of  58.00  from holding Janus International Group or generate 7.75% return on investment over 90 days.

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

Janus International Group  vs.  Beacon Roofing Supply

Janus International

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Janus International Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Janus International may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Beacon Roofing Supply

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Beacon Roofing is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Janus International and Beacon Roofing

The main advantage of trading using opposite Janus International and Beacon Roofing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Janus International 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 Janus International Group 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.