Correlation Between Armstrong Flooring and Quanex Building

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Can any of the company-specific risk be diversified away by investing in both Armstrong Flooring and Quanex Building 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 Armstrong Flooring and Quanex Building into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armstrong Flooring and Quanex Building Products, you can compare the effects of market volatilities on Armstrong Flooring and Quanex Building 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 Armstrong Flooring with a short position of Quanex Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong Flooring and Quanex Building.

Diversification Opportunities for Armstrong Flooring and Quanex Building

-0.08
  Correlation Coefficient

Good diversification

The 3 months correlation between Armstrong and Quanex is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong Flooring and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products and Armstrong Flooring 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 Armstrong Flooring are associated (or correlated) with Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of Armstrong Flooring i.e., Armstrong Flooring and Quanex Building go up and down completely randomly.

Pair Corralation between Armstrong Flooring and Quanex Building

If you would invest  3,452  in Quanex Building Products on December 30, 2023 and sell it today you would earn a total of  391.00  from holding Quanex Building Products or generate 11.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

Armstrong Flooring  vs.  Quanex Building Products

 Performance 
       Timeline  
Armstrong Flooring 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Armstrong Flooring has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Armstrong Flooring is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
Quanex Building Products 

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

Armstrong Flooring and Quanex Building Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Armstrong Flooring and Quanex Building

The main advantage of trading using opposite Armstrong Flooring and Quanex Building positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong Flooring position performs unexpectedly, Quanex Building 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 Quanex Building will offset losses from the drop in Quanex Building's long position.
The idea behind Armstrong Flooring and Quanex Building Products 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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