Correlation Between Interface and Owens Corning

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

By analyzing existing cross correlation between Interface and Owens Corning, you can compare the effects of market volatilities on Interface and Owens Corning 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 Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Interface and Owens Corning.

Diversification Opportunities for Interface and Owens Corning

0.51

Correlation Coefficient

Interface  Owens Corning

Very weak diversification

The 3 months correlation between Interface and Owens is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Interface and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Interface i.e., Interface and Owens Corning go up and down completely randomly.

Pair Corralation between Interface and Owens Corning

Given the investment horizon of 90 days Interface is expected to generate 1.6 times more return on investment than Owens Corning. However, Interface is 1.6 times more volatile than Owens Corning. It trades about 0.07 of its potential returns per unit of risk. Owens Corning is currently generating about 0.07 per unit of risk. If you would invest  1,155  in Interface on October 5, 2024 and sell it today you would earn a total of  1,241  from holding Interface or generate 107.45% return on investment over 90 days.

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

Interface  vs.  Owens Corning

Interface

Risk-Adjusted Performance

9 of 100

OK

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

Owens Corning

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Owens Corning has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Owens Corning is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Interface and Owens Corning

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

The idea behind Interface and Owens Corning 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.