Correlation Between Gibraltar Industries and Interface

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

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

Diversification Opportunities for Gibraltar Industries and Interface

-0.22

Correlation Coefficient

Gibraltar Industries  Interface

Very good diversification

The 3 months correlation between Gibraltar and Interface is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Gibraltar Industries and Interface in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Interface and Gibraltar Industries 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 Gibraltar Industries are associated (or correlated) with Interface. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Interface has no effect on the direction of Gibraltar Industries i.e., Gibraltar Industries and Interface go up and down completely randomly.

Pair Corralation between Gibraltar Industries and Interface

Given the investment horizon of 90 days Gibraltar Industries is expected to generate 2.64 times less return on investment than Interface. But when comparing it to its historical volatility, Gibraltar Industries is 2.04 times less risky than Interface. It trades about 0.06 of its potential returns per unit of risk. Interface is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,544  in Interface on February 15, 2024 and sell it today you would earn a total of  72.00  from holding Interface or generate 4.66% return on investment over 90 days.

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

Gibraltar Industries  vs.  Interface

Gibraltar Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gibraltar Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's fundamental indicators remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Interface

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Interface are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Interface exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gibraltar Industries and Interface

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

The idea behind Gibraltar Industries and Interface 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.