Correlation Between Owens Corning and Armstrong World

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

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

Diversification Opportunities for Owens Corning and Armstrong World

0.74

Correlation Coefficient

Owens Corning  Armstrong World

Poor diversification

The 3 months correlation between Owens and Armstrong is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Owens Corning and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Owens Corning 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 Owens Corning are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Owens Corning i.e., Owens Corning and Armstrong World go up and down completely randomly.

Pair Corralation between Owens Corning and Armstrong World

Allowing for the 90-day total investment horizon Owens Corning is expected to under-perform the Armstrong World. But the stock apears to be less risky and, when comparing its historical volatility, Owens Corning is 1.1 times less risky than Armstrong World. The stock trades about -0.6 of its potential returns per unit of risk. The Armstrong World Industries is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  15,101  in Armstrong World Industries on December 2, 2024 and sell it today you would earn a total of  265.00  from holding Armstrong World Industries or generate 1.75% return on investment over 90 days.

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

Owens Corning  vs.  Armstrong World Industries

Owens Corning

Risk-Adjusted Performance

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Armstrong World Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Armstrong World Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Armstrong World is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Owens Corning and Armstrong World

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

The idea behind Owens Corning and Armstrong World 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.