Correlation Between Lixil Group and Quanex Building

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

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

Diversification Opportunities for Lixil Group and Quanex Building

-0.57

Correlation Coefficient

Lixil Group  Quanex Building

Excellent diversification

The 3 months correlation between Lixil and Quanex is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lixil Group Corp and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products and Lixil Group 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 Lixil Group Corp are associated (or correlated) with Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Lixil Group i.e., Lixil Group and Quanex Building go up and down completely randomly.

Pair Corralation between Lixil Group and Quanex Building

Assuming the 90 days horizon Lixil Group Corp is expected to generate 0.34 times more return on investment than Quanex Building. However, Lixil Group Corp is 2.93 times less risky than Quanex Building. It trades about -0.24 of its potential returns per unit of risk. Quanex Building Products is currently generating about -0.23 per unit of risk. If you would invest  2,279  in Lixil Group Corp on September 20, 2024 and sell it today you would lose (94.00) from holding Lixil Group Corp or give up 4.12% of portfolio value over 90 days.

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

Lixil Group Corp  vs.  Quanex Building Products

Lixil Group Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lixil Group Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Quanex Building Products

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Quanex Building is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lixil Group and Quanex Building

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

The idea behind Lixil Group Corp and Quanex Building Products 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..