Correlation Between Travis Perkins and Armstrong World
Can any of the company-specific risk be diversified away by investing in both Travis Perkins 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 Travis Perkins and Armstrong World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Travis Perkins PLC and Armstrong World Industries, you can compare the effects of market volatilities on Travis Perkins 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 Travis Perkins with a short position of Armstrong World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Travis Perkins and Armstrong World.
Diversification Opportunities for Travis Perkins and Armstrong World
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Travis and Armstrong is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Travis Perkins PLC 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 Travis Perkins 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 Travis Perkins PLC 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 Travis Perkins i.e., Travis Perkins and Armstrong World go up and down completely randomly.
Pair Corralation between Travis Perkins and Armstrong World
Assuming the 90 days horizon Travis Perkins PLC is expected to generate 1.77 times more return on investment than Armstrong World. However, Travis Perkins is 1.77 times more volatile than Armstrong World Industries. It trades about 0.32 of its potential returns per unit of risk. Armstrong World Industries is currently generating about 0.06 per unit of risk. If you would invest 904.00 in Travis Perkins PLC on February 16, 2024 and sell it today you would earn a total of 124.00 from holding Travis Perkins PLC or generate 13.72% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 95.65% |
Values | Daily Returns |
Travis Perkins PLC vs. Armstrong World Industries
Performance |
Timeline |
Travis Perkins PLC |
Armstrong World Indu |
Travis Perkins and Armstrong World Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Travis Perkins and Armstrong World
The main advantage of trading using opposite Travis Perkins and Armstrong World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Travis Perkins 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.Travis Perkins vs. Trane Technologies plc | Travis Perkins vs. Carrier GlobalCorp | Travis Perkins vs. Johnson Controls International | Travis Perkins vs. Builders FirstSource |
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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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