Correlation Between Interface and Armstrong World

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

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

Diversification Opportunities for Interface and Armstrong World

0.14

Correlation Coefficient

Interface  Armstrong World

Average diversification

The 3 months correlation between Interface and Armstrong is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Interface and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Interface 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 Interface are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Interface i.e., Interface and Armstrong World go up and down completely randomly.

Pair Corralation between Interface and Armstrong World

Given the investment horizon of 90 days Interface is expected to under-perform the Armstrong World. In addition to that, Interface is 1.52 times more volatile than Armstrong World Industries. It trades about -0.13 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about -0.01 per unit of volatility. If you would invest  14,162  in Armstrong World Industries on December 30, 2024 and sell it today you would lose (207.00) from holding Armstrong World Industries or give up 1.46% of portfolio value over 90 days.

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

Interface  vs.  Armstrong World Industries

Interface

Risk-Adjusted Performance

Very Weak

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

Armstrong World Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Armstrong World Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Armstrong World is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Interface and Armstrong World

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

The idea behind Interface and Armstrong World Industries 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.