Correlation Between Latham and Azek

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

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

Diversification Opportunities for Latham and Azek

0.21

Correlation Coefficient

Latham  Azek

Modest diversification

The 3 months correlation between Latham and Azek is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Latham Group and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and Latham 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 Latham Group are associated (or correlated) with Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Latham i.e., Latham and Azek go up and down completely randomly.

Pair Corralation between Latham and Azek

Given the investment horizon of 90 days Latham Group is expected to generate 1.81 times more return on investment than Azek. However, Latham is 1.81 times more volatile than Azek Company. It trades about 0.02 of its potential returns per unit of risk. Azek Company is currently generating about 0.03 per unit of risk. If you would invest  700.00  in Latham Group on December 27, 2024 and sell it today you would lose (1.00) from holding Latham Group or give up 0.14% of portfolio value over 90 days.

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

Latham Group  vs.  Azek Company

Latham Group

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Latham Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent forward indicators, Latham may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Azek Company

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Azek Company are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Azek is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Latham and Azek

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

The idea behind Latham Group and Azek Company 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.