Correlation Between Quanex Building and Armstrong World

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

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

Diversification Opportunities for Quanex Building and Armstrong World

0.8

Correlation Coefficient

Quanex Building  Armstrong World

Very poor diversification

The 3 months correlation between Quanex and Armstrong is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products 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 Quanex Building 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 Quanex Building Products 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 Quanex Building i.e., Quanex Building and Armstrong World go up and down completely randomly.

Pair Corralation between Quanex Building and Armstrong World

Allowing for the 90-day total investment horizon Quanex Building Products is expected to generate 2.83 times more return on investment than Armstrong World. However, Quanex Building is 2.83 times more volatile than Armstrong World Industries. It trades about 0.11 of its potential returns per unit of risk. Armstrong World Industries is currently generating about 0.27 per unit of risk. If you would invest  1,634  in Quanex Building Products on April 25, 2025 and sell it today you would earn a total of  351.00  from holding Quanex Building Products or generate 21.48% return on investment over 90 days.

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

Quanex Building Products  vs.  Armstrong World Industries

Quanex Building Products

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

Armstrong World Indu

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Armstrong World Industries are ranked lower than 21 (%) 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 Quanex Building and Armstrong World

The main advantage of trading using opposite Quanex Building and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quanex Building 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 Quanex Building Products 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.