Correlation Between Quanex Building and Gibraltar Industries

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

Diversification Opportunities for Quanex Building and Gibraltar Industries

0.82

Correlation Coefficient

Quanex Building  Gibraltar Industries

Very poor diversification

The 3 months correlation between Quanex and Gibraltar is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and Gibraltar Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibraltar Industries 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 Gibraltar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibraltar Industries has no effect on the direction of Quanex Building i.e., Quanex Building and Gibraltar Industries go up and down completely randomly.

Pair Corralation between Quanex Building and Gibraltar Industries

Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the Gibraltar Industries. In addition to that, Quanex Building is 1.24 times more volatile than Gibraltar Industries. It trades about -0.21 of its total potential returns per unit of risk. Gibraltar Industries is currently generating about -0.05 per unit of volatility. If you would invest  7,244  in Gibraltar Industries on November 28, 2024 and sell it today you would lose (542.00) from holding Gibraltar Industries or give up 7.48% of portfolio value over 90 days.

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

Quanex Building Products  vs.  Gibraltar Industries

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.

Gibraltar Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's 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 Gibraltar Industries

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

The idea behind Quanex Building Products and Gibraltar 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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.