Correlation Between Quanex Building and BELIMO Holding

Can any of the company-specific risk be diversified away by investing in both Quanex Building and BELIMO Holding 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 BELIMO Holding 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 BELIMO Holding AG, you can compare the effects of market volatilities on Quanex Building and BELIMO Holding 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 BELIMO Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Quanex Building and BELIMO Holding.

Diversification Opportunities for Quanex Building and BELIMO Holding

0.49

Correlation Coefficient

Quanex Building  BELIMO Holding

Very weak diversification

The 3 months correlation between Quanex and BELIMO is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and BELIMO Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BELIMO Holding AG 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 BELIMO Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BELIMO Holding AG has no effect on the direction of Quanex Building i.e., Quanex Building and BELIMO Holding go up and down completely randomly.

Pair Corralation between Quanex Building and BELIMO Holding

Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the BELIMO Holding. In addition to that, Quanex Building is 3.33 times more volatile than BELIMO Holding AG. It trades about -0.4 of its total potential returns per unit of risk. BELIMO Holding AG is currently generating about -0.21 per unit of volatility. If you would invest  70,900  in BELIMO Holding AG on September 22, 2024 and sell it today you would lose (2,961) from holding BELIMO Holding AG or give up 4.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Quanex Building Products  vs.  BELIMO Holding AG

Quanex Building Products

Risk-Adjusted Performance

0 of 100

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 January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BELIMO Holding AG

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BELIMO Holding AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, BELIMO Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Quanex Building and BELIMO Holding

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

The idea behind Quanex Building Products and BELIMO Holding AG 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.