Correlation Between AZZ Incorporated and BrightView Holdings

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

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

Diversification Opportunities for AZZ Incorporated and BrightView Holdings

0.16

Correlation Coefficient

AZZ Incorporated  BrightView Holdings

Average diversification

The 3 months correlation between AZZ and BrightView is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding AZZ Incorporated and BrightView Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BrightView Holdings and AZZ Incorporated 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 AZZ Incorporated are associated (or correlated) with BrightView Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BrightView Holdings has no effect on the direction of AZZ Incorporated i.e., AZZ Incorporated and BrightView Holdings go up and down completely randomly.

Pair Corralation between AZZ Incorporated and BrightView Holdings

Considering the 90-day investment horizon AZZ Incorporated is expected to under-perform the BrightView Holdings. But the stock apears to be less risky and, when comparing its historical volatility, AZZ Incorporated is 1.06 times less risky than BrightView Holdings. The stock trades about -0.11 of its potential returns per unit of risk. The BrightView Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,566  in BrightView Holdings on July 21, 2024 and sell it today you would earn a total of  110.00  from holding BrightView Holdings or generate 7.02% return on investment over 90 days.

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

AZZ Incorporated  vs.  BrightView Holdings

AZZ Incorporated

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AZZ Incorporated has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AZZ Incorporated is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

BrightView Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BrightView Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, BrightView Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AZZ Incorporated and BrightView Holdings

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

The idea behind AZZ Incorporated and BrightView Holdings 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.