Correlation Between RB Global and AZZ Incorporated

Can any of the company-specific risk be diversified away by investing in both RB Global and AZZ Incorporated 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 RB Global and AZZ Incorporated into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for RB Global and AZZ Incorporated

0.84

Correlation Coefficient

RB Global  AZZ Incorporated

Very poor diversification

The 3 months correlation between RBA and AZZ is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding RB Global and AZZ Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AZZ Incorporated and RB Global 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 RB Global are associated (or correlated) with AZZ Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AZZ Incorporated has no effect on the direction of RB Global i.e., RB Global and AZZ Incorporated go up and down completely randomly.

Pair Corralation between RB Global and AZZ Incorporated

Considering the 90-day investment horizon RB Global is expected to generate 0.48 times more return on investment than AZZ Incorporated. However, RB Global is 2.1 times less risky than AZZ Incorporated. It trades about -0.34 of its potential returns per unit of risk. AZZ Incorporated is currently generating about -0.26 per unit of risk. If you would invest  9,737  in RB Global on October 10, 2024 and sell it today you would lose (701.00) from holding RB Global or give up 7.2% of portfolio value over 90 days.

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

RB Global  vs.  AZZ Incorporated

RB Global

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RB Global are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental drivers, RB Global sustained solid returns over the last few months and may actually be approaching a breakup point.

AZZ Incorporated

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AZZ Incorporated are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, AZZ Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with RB Global and AZZ Incorporated

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

The idea behind RB Global and AZZ Incorporated 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.