Correlation Between Perma Pipe and Armstrong World

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

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

Diversification Opportunities for Perma Pipe and Armstrong World

0.27

Correlation Coefficient

Perma Pipe  Armstrong World

Modest diversification

The 3 months correlation between Perma and Armstrong is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Perma Pipe International Holdi 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 Perma Pipe 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 Perma Pipe International Holdings 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 Perma Pipe i.e., Perma Pipe and Armstrong World go up and down completely randomly.

Pair Corralation between Perma Pipe and Armstrong World

Given the investment horizon of 90 days Perma Pipe International Holdings is expected to under-perform the Armstrong World. In addition to that, Perma Pipe is 1.92 times more volatile than Armstrong World Industries. It trades about -0.05 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about 0.03 per unit of volatility. If you would invest  14,162  in Armstrong World Industries on December 29, 2024 and sell it today you would earn a total of  265.00  from holding Armstrong World Industries or generate 1.87% return on investment over 90 days.

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

Perma Pipe International Holdi  vs.  Armstrong World Industries

Perma Pipe Internati

Risk-Adjusted Performance

Very Weak

Over the last 90 days Perma Pipe International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Armstrong World Indu

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Armstrong World Industries are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. 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 Perma Pipe and Armstrong World

The main advantage of trading using opposite Perma Pipe and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Perma Pipe 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 Perma Pipe International Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.