Correlation Between Masco and Owens Corning

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

By analyzing existing cross correlation between Masco and Owens Corning, you can compare the effects of market volatilities on Masco and Owens Corning 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 Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masco and Owens Corning.

Diversification Opportunities for Masco and Owens Corning

0.79

Correlation Coefficient

Masco  Owens Corning

Poor diversification

The 3 months correlation between Masco and Owens is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Masco and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Masco i.e., Masco and Owens Corning go up and down completely randomly.

Pair Corralation between Masco and Owens Corning

Considering the 90-day investment horizon Masco is expected to generate 0.75 times more return on investment than Owens Corning. However, Masco is 1.33 times less risky than Owens Corning. It trades about -0.03 of its potential returns per unit of risk. Owens Corning is currently generating about -0.1 per unit of risk. If you would invest  7,292  in Masco on December 27, 2024 and sell it today you would lose (251.00) from holding Masco or give up 3.44% of portfolio value over 90 days.

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

Masco  vs.  Owens Corning

Masco

Risk-Adjusted Performance

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 comparatively stable basic indicators, Masco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Owens Corning

Risk-Adjusted Performance

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Masco and Owens Corning

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

The idea behind Masco and Owens Corning 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.