Correlation Between Gibraltar Industries and Quanex Building

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

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

Diversification Opportunities for Gibraltar Industries and Quanex Building

0.82

Correlation Coefficient

Gibraltar Industries  Quanex Building

Very poor diversification

The 3 months correlation between Gibraltar and Quanex is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Gibraltar Industries 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 Gibraltar Industries 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 Gibraltar Industries 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 Gibraltar Industries i.e., Gibraltar Industries and Quanex Building go up and down completely randomly.

Pair Corralation between Gibraltar Industries and Quanex Building

Given the investment horizon of 90 days Gibraltar Industries is expected to generate 0.8 times more return on investment than Quanex Building. However, Gibraltar Industries is 1.24 times less risky than Quanex Building. It trades about -0.05 of its potential returns per unit of risk. Quanex Building Products is currently generating about -0.21 per unit of risk. If you would invest  7,244  in Gibraltar Industries on November 28, 2024 and sell it today you would lose (542.00) from holding Gibraltar Industries or give up 7.48% of portfolio value over 90 days.

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

Gibraltar Industries  vs.  Quanex Building Products

Gibraltar Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Quanex Building Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Quanex Building Products has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Gibraltar Industries and Quanex Building

The main advantage of trading using opposite Gibraltar Industries and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gibraltar Industries 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 Gibraltar Industries 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.