Correlation Between Trex and Alpha Pro

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

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

Diversification Opportunities for Trex and Alpha Pro

0.19

Correlation Coefficient

Trex  Alpha Pro

Average diversification

The 3 months correlation between Trex and Alpha is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Trex Company and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Trex 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 Trex Company are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Trex i.e., Trex and Alpha Pro go up and down completely randomly.

Pair Corralation between Trex and Alpha Pro

Given the investment horizon of 90 days Trex Company is expected to generate 0.93 times more return on investment than Alpha Pro. However, Trex Company is 1.08 times less risky than Alpha Pro. It trades about 0.1 of its potential returns per unit of risk. Alpha Pro Tech is currently generating about 0.08 per unit of risk. If you would invest  6,186  in Trex Company on July 11, 2024 and sell it today you would earn a total of  277.00  from holding Trex Company or generate 4.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Trex Company  vs.  Alpha Pro Tech

Trex Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trex Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Alpha Pro Tech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Pro Tech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Pro is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Trex and Alpha Pro

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

The idea behind Trex Company and Alpha Pro Tech 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.