Correlation Between Owens Corning and Advanced Drainage

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

By analyzing existing cross correlation between Owens Corning and Advanced Drainage Systems, you can compare the effects of market volatilities on Owens Corning and Advanced Drainage 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 Advanced Drainage. Check out your portfolio center. Please also check ongoing floating volatility patterns of Owens Corning and Advanced Drainage.

Diversification Opportunities for Owens Corning and Advanced Drainage

-0.49

Correlation Coefficient

Owens Corning  Advanced Drainage

Very good diversification

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

Pair Corralation between Owens Corning and Advanced Drainage

Allowing for the 90-day total investment horizon Owens Corning is expected to generate 0.76 times more return on investment than Advanced Drainage. However, Owens Corning is 1.32 times less risky than Advanced Drainage. It trades about 0.08 of its potential returns per unit of risk. Advanced Drainage Systems is currently generating about 0.04 per unit of risk. If you would invest  8,390  in Owens Corning on September 23, 2024 and sell it today you would earn a total of  8,551  from holding Owens Corning or generate 101.92% return on investment over 90 days.

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

Owens Corning  vs.  Advanced Drainage Systems

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.

Advanced Drainage Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Advanced Drainage Systems has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Owens Corning and Advanced Drainage

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

The idea behind Owens Corning and Advanced Drainage Systems 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.