Correlation Between PGT Innovations and Quanex Building

Can any of the company-specific risk be diversified away by investing in both PGT Innovations and Quanex Building 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 PGT Innovations and Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PGT Innovations and Quanex Building Products, you can compare the effects of market volatilities on PGT Innovations and Quanex Building 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 PGT Innovations with a short position of Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of PGT Innovations and Quanex Building.

Diversification Opportunities for PGT Innovations and Quanex Building

0.81

Correlation Coefficient

PGT Innovations  Quanex Building

Very poor diversification

The 3 months correlation between PGT and Quanex is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding PGT Innovations and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products and PGT Innovations 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 PGT Innovations are associated (or correlated) with Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of PGT Innovations i.e., PGT Innovations and Quanex Building go up and down completely randomly.

Pair Corralation between PGT Innovations and Quanex Building

Given the investment horizon of 90 days PGT Innovations is expected to generate 0.79 times more return on investment than Quanex Building. However, PGT Innovations is 1.27 times less risky than Quanex Building. It trades about 0.13 of its potential returns per unit of risk. Quanex Building Products is currently generating about 0.03 per unit of risk. If you would invest  1,893  in PGT Innovations on September 2, 2024 and sell it today you would earn a total of  902.00  from holding PGT Innovations or generate 47.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	31.05%
Values	Daily Returns

PGT Innovations  vs.  Quanex Building Products

PGT Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

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

Quanex Building Products

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PGT Innovations and Quanex Building

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

The idea behind PGT Innovations and Quanex Building Products 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.