Correlation Between Trex and Gibraltar Industries

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

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

Diversification Opportunities for Trex and Gibraltar Industries

0.45

Correlation Coefficient

Trex  Gibraltar Industries

Very weak diversification

The 3 months correlation between Trex and Gibraltar is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Trex Company and Gibraltar Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gibraltar Industries and Trex 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 Trex Company are associated (or correlated) with Gibraltar Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gibraltar Industries has no effect on the direction of Trex i.e., Trex and Gibraltar Industries go up and down completely randomly.

Pair Corralation between Trex and Gibraltar Industries

Given the investment horizon of 90 days Trex Company is expected to under-perform the Gibraltar Industries. But the stock apears to be less risky and, when comparing its historical volatility, Trex Company is 1.05 times less risky than Gibraltar Industries. The stock trades about -0.14 of its potential returns per unit of risk. The Gibraltar Industries is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  7,281  in Gibraltar Industries on December 1, 2024 and sell it today you would lose (710.00) from holding Gibraltar Industries or give up 9.75% of portfolio value over 90 days.

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

Trex Company  vs.  Gibraltar Industries

Trex Company

Risk-Adjusted Performance

Very Weak

Over the last 90 days Trex Company 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 technical and fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Gibraltar Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Trex and Gibraltar Industries

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

The idea behind Trex Company and Gibraltar 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.