Correlation Between Mohawk Industries and Patrick Industries

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

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

Diversification Opportunities for Mohawk Industries and Patrick Industries

0.57

Correlation Coefficient

Mohawk Industries  Patrick Industries

Very weak diversification

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

Pair Corralation between Mohawk Industries and Patrick Industries

Considering the 90-day investment horizon Mohawk Industries is expected to under-perform the Patrick Industries. In addition to that, Mohawk Industries is 1.06 times more volatile than Patrick Industries. It trades about -0.03 of its total potential returns per unit of risk. Patrick Industries is currently generating about 0.03 per unit of volatility. If you would invest  8,236  in Patrick Industries on December 28, 2024 and sell it today you would earn a total of  154.00  from holding Patrick Industries or generate 1.87% return on investment over 90 days.

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

Mohawk Industries  vs.  Patrick Industries

Mohawk Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mohawk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical indicators, Mohawk Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Patrick Industries

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Patrick Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Patrick Industries is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Mohawk Industries and Patrick Industries

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

The idea behind Mohawk Industries and Patrick Industries 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.