Correlation Between Simpson Manufacturing and Homasote

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

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

Diversification Opportunities for Simpson Manufacturing and Homasote

-0.72

Correlation Coefficient

Simpson Manufacturing  Homasote

Pay attention - limited upside

The 3 months correlation between Simpson and Homasote is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Simpson Manufacturing and Homasote Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homasote and Simpson Manufacturing 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 Simpson Manufacturing are associated (or correlated) with Homasote. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homasote has no effect on the direction of Simpson Manufacturing i.e., Simpson Manufacturing and Homasote go up and down completely randomly.

Pair Corralation between Simpson Manufacturing and Homasote

Considering the 90-day investment horizon Simpson Manufacturing is expected to under-perform the Homasote. But the stock apears to be less risky and, when comparing its historical volatility, Simpson Manufacturing is 2.56 times less risky than Homasote. The stock trades about -0.13 of its potential returns per unit of risk. The Homasote Co is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  347.00  in Homasote Co on October 6, 2024 and sell it today you would earn a total of  118.00  from holding Homasote Co or generate 34.01% return on investment over 90 days.

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

Simpson Manufacturing  vs.  Homasote Co

Simpson Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Simpson Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Homasote

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Homasote Co are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Homasote exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simpson Manufacturing and Homasote

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

The idea behind Simpson Manufacturing and Homasote Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.