Correlation Between Azek and Quanex Building
Can any of the company-specific risk be diversified away by investing in both Azek and Quanex Building 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 Azek and Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Azek Company and Quanex Building Products, you can compare the effects of market volatilities on Azek and Quanex Building 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 Azek with a short position of Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Azek and Quanex Building.
Diversification Opportunities for Azek and Quanex Building
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Azek and Quanex is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products and Azek 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 Azek Company are associated (or correlated) with Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Azek i.e., Azek and Quanex Building go up and down completely randomly.
Pair Corralation between Azek and Quanex Building
Given the investment horizon of 90 days Azek Company is expected to generate 1.11 times more return on investment than Quanex Building. However, Azek is 1.11 times more volatile than Quanex Building Products. It trades about 0.16 of its potential returns per unit of risk. Quanex Building Products is currently generating about 0.08 per unit of risk. If you would invest 4,100 in Azek Company on July 10, 2024 and sell it today you would earn a total of 253.00 from holding Azek Company or generate 6.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Azek Company vs. Quanex Building Products
Performance |
Timeline |
Azek Company |
Quanex Building Products |
Azek and Quanex Building Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Azek and Quanex Building
The main advantage of trading using opposite Azek and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Azek position performs unexpectedly, Quanex Building 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 Quanex Building will offset losses from the drop in Quanex Building's long position.Azek vs. Louisiana Pacific | Azek vs. Masco | Azek vs. Fortune Brands Innovations | Azek vs. Trane Technologies plc |
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Check out your portfolio center.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.
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