Correlation Between Lennox International and Masco

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

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

Diversification Opportunities for Lennox International and Masco

0.8

Correlation Coefficient

Lennox International  Masco

Very poor diversification

The 3 months correlation between Lennox and Masco is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Lennox International and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and Lennox 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 Lennox International are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of Lennox International i.e., Lennox International and Masco go up and down completely randomly.

Pair Corralation between Lennox International and Masco

Considering the 90-day investment horizon Lennox International is expected to generate 1.17 times more return on investment than Masco. However, Lennox International is 1.17 times more volatile than Masco. It trades about -0.05 of its potential returns per unit of risk. Masco is currently generating about -0.1 per unit of risk. If you would invest  61,851  in Lennox International on January 12, 2025 and sell it today you would lose (6,409) from holding Lennox International or give up 10.36% of portfolio value over 90 days.

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

Lennox International  vs.  Masco

Lennox International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lennox International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Masco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Masco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Lennox International and Masco

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

The idea behind Lennox International and Masco 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..