Correlation Between SiteOne Landscape and BlueLinx Holdings

Can any of the company-specific risk be diversified away by investing in both SiteOne Landscape and BlueLinx Holdings 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 SiteOne Landscape and BlueLinx Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SiteOne Landscape Supply and BlueLinx Holdings, you can compare the effects of market volatilities on SiteOne Landscape and BlueLinx Holdings 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 SiteOne Landscape with a short position of BlueLinx Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of SiteOne Landscape and BlueLinx Holdings.

Diversification Opportunities for SiteOne Landscape and BlueLinx Holdings

0.59

Correlation Coefficient

SiteOne Landscape  BlueLinx Holdings

Very weak diversification

The 3 months correlation between SiteOne and BlueLinx is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding SiteOne Landscape Supply and BlueLinx Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BlueLinx Holdings and SiteOne Landscape 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 SiteOne Landscape Supply are associated (or correlated) with BlueLinx Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BlueLinx Holdings has no effect on the direction of SiteOne Landscape i.e., SiteOne Landscape and BlueLinx Holdings go up and down completely randomly.

Pair Corralation between SiteOne Landscape and BlueLinx Holdings

Given the investment horizon of 90 days SiteOne Landscape is expected to generate 2.0 times less return on investment than BlueLinx Holdings. But when comparing it to its historical volatility, SiteOne Landscape Supply is 1.18 times less risky than BlueLinx Holdings. It trades about 0.1 of its potential returns per unit of risk. BlueLinx Holdings is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  9,565  in BlueLinx Holdings on August 31, 2024 and sell it today you would earn a total of  2,948  from holding BlueLinx Holdings or generate 30.82% return on investment over 90 days.

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

SiteOne Landscape Supply  vs.  BlueLinx Holdings

SiteOne Landscape Supply

Risk-Adjusted Performance

8 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SiteOne Landscape Supply are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, SiteOne Landscape exhibited solid returns over the last few months and may actually be approaching a breakup point.

BlueLinx Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BlueLinx Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BlueLinx Holdings exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SiteOne Landscape and BlueLinx Holdings

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

The idea behind SiteOne Landscape Supply and BlueLinx Holdings 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.