Correlation Between Owens Corning and Gibraltar Industries

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

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

Diversification Opportunities for Owens Corning and Gibraltar Industries

0.89

Correlation Coefficient

Owens Corning  Gibraltar Industries

Very poor diversification

The 3 months correlation between Owens and Gibraltar is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Owens Corning and Gibraltar Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibraltar Industries 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 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 Owens Corning i.e., Owens Corning and Gibraltar Industries go up and down completely randomly.

Pair Corralation between Owens Corning and Gibraltar Industries

Allowing for the 90-day total investment horizon Owens Corning is expected to generate 0.94 times more return on investment than Gibraltar Industries. However, Owens Corning is 1.07 times less risky than Gibraltar Industries. It trades about 0.02 of its potential returns per unit of risk. Gibraltar Industries is currently generating about -0.08 per unit of risk. If you would invest  17,676  in Owens Corning on October 20, 2024 and sell it today you would earn a total of  592.00  from holding Owens Corning or generate 3.35% return on investment over 90 days.

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

Owens Corning  vs.  Gibraltar Industries

Owens Corning

Risk-Adjusted Performance

0 of 100

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 rather sound fundamental indicators, Owens Corning is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Gibraltar Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Gibraltar Industries is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Owens Corning and Gibraltar Industries

The main advantage of trading using opposite Owens Corning and Gibraltar Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Owens Corning 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 Owens Corning 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.