Correlation Between Quanex Building and Azek

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

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

Diversification Opportunities for Quanex Building and Azek

0.27

Correlation Coefficient

Quanex Building  Azek

Modest diversification

The 3 months correlation between Quanex and Azek is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and Quanex Building 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 Quanex Building Products 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 Quanex Building i.e., Quanex Building and Azek go up and down completely randomly.

Pair Corralation between Quanex Building and Azek

Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the Azek. In addition to that, Quanex Building is 1.79 times more volatile than Azek Company. It trades about -0.16 of its total potential returns per unit of risk. Azek Company is currently generating about -0.24 per unit of volatility. If you would invest  5,123  in Azek Company on November 29, 2024 and sell it today you would lose (445.00) from holding Azek Company or give up 8.69% of portfolio value over 90 days.

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

Quanex Building Products  vs.  Azek Company

Quanex Building Products

Risk-Adjusted Performance

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 conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Azek Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Azek Company has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Quanex Building and Azek

The main advantage of trading using opposite Quanex Building and Azek positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building 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 Quanex Building Products 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.