Correlation Between Masonite International and Armstrong World

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

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

Diversification Opportunities for Masonite International and Armstrong World

0.54

Correlation Coefficient

Masonite International  Armstrong World

Very weak diversification

The 3 months correlation between Masonite and Armstrong is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Masonite International Corp and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Masonite International 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 Masonite International Corp are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Masonite International i.e., Masonite International and Armstrong World go up and down completely randomly.

Pair Corralation between Masonite International and Armstrong World

If you would invest  11,783  in Armstrong World Industries on July 11, 2024 and sell it today you would earn a total of  1,625  from holding Armstrong World Industries or generate 13.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Masonite International Corp  vs.  Armstrong World Industries

Masonite International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Masonite International Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Masonite International is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Armstrong World Indu

Risk-Adjusted Performance

10 of 100

OK

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

Pair Trading with Masonite International and Armstrong World

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

The idea behind Masonite International Corp and Armstrong World 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..