Correlation Between Masco and Alpha Pro

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

Diversification Opportunities for Masco and Alpha Pro

0.7
  Correlation Coefficient

Poor diversification

The 3 months correlation between Masco and Alpha is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Masco 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 Masco are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Masco i.e., Masco and Alpha Pro go up and down completely randomly.

Pair Corralation between Masco and Alpha Pro

Considering the 90-day investment horizon Masco is expected to generate 0.63 times more return on investment than Alpha Pro. However, Masco is 1.58 times less risky than Alpha Pro. It trades about 0.07 of its potential returns per unit of risk. Alpha Pro Tech is currently generating about 0.04 per unit of risk. If you would invest  4,570  in Masco on September 23, 2024 and sell it today you would earn a total of  2,869  from holding Masco or generate 62.78% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Masco  vs.  Alpha Pro Tech

 Performance 
       Timeline  
Masco 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Masco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
Alpha Pro Tech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Alpha Pro Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Pro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Masco and Alpha Pro Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Masco and Alpha Pro

The main advantage of trading using opposite Masco and Alpha Pro positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masco position performs unexpectedly, Alpha Pro 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 Alpha Pro will offset losses from the drop in Alpha Pro's long position.
The idea behind Masco and Alpha Pro Tech 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..

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