Correlation Between Builders FirstSource and Matson

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

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

Diversification Opportunities for Builders FirstSource and Matson

-0.43

Correlation Coefficient

Builders FirstSource  Matson

Very good diversification

The 3 months correlation between Builders and Matson is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Builders FirstSource and Matson Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Matson Inc and Builders FirstSource 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 Builders FirstSource are associated (or correlated) with Matson. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Matson Inc has no effect on the direction of Builders FirstSource i.e., Builders FirstSource and Matson go up and down completely randomly.

Pair Corralation between Builders FirstSource and Matson

Given the investment horizon of 90 days Builders FirstSource is expected to generate 1.58 times more return on investment than Matson. However, Builders FirstSource is 1.58 times more volatile than Matson Inc. It trades about 0.15 of its potential returns per unit of risk. Matson Inc is currently generating about -0.03 per unit of risk. If you would invest  11,150  in Builders FirstSource on May 25, 2025 and sell it today you would earn a total of  3,295  from holding Builders FirstSource or generate 29.55% return on investment over 90 days.

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

Builders FirstSource  vs.  Matson Inc

Builders FirstSource

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Builders FirstSource are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental indicators, Builders FirstSource reported solid returns over the last few months and may actually be approaching a breakup point.

Matson Inc

Risk-Adjusted Performance

Weakest

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

Pair Trading with Builders FirstSource and Matson

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

The idea behind Builders FirstSource and Matson Inc 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.