Correlation Between NIBE Industrier and Azek

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

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

Diversification Opportunities for NIBE Industrier and Azek

-0.63

Correlation Coefficient

NIBE Industrier  Azek

Excellent diversification

The 3 months correlation between NIBE and Azek is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding NIBE Industrier AB and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and NIBE Industrier 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 NIBE Industrier AB are associated (or correlated) with Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of NIBE Industrier i.e., NIBE Industrier and Azek go up and down completely randomly.

Pair Corralation between NIBE Industrier and Azek

Assuming the 90 days horizon NIBE Industrier AB is expected to under-perform the Azek. In addition to that, NIBE Industrier is 1.6 times more volatile than Azek Company. It trades about -0.2 of its total potential returns per unit of risk. Azek Company is currently generating about -0.19 per unit of volatility. If you would invest  5,334  in Azek Company on September 26, 2024 and sell it today you would lose (408.00) from holding Azek Company or give up 7.65% of portfolio value over 90 days.

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

NIBE Industrier AB  vs.  Azek Company

NIBE Industrier AB

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days NIBE Industrier AB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Azek Company

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Azek Company are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Azek may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with NIBE Industrier and Azek

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

The idea behind NIBE Industrier AB and Azek Company 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.