Correlation Between Ameresco and Topbuild Corp

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

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

Diversification Opportunities for Ameresco and Topbuild Corp

0.68

Correlation Coefficient

Ameresco  Topbuild Corp

Poor diversification

The 3 months correlation between Ameresco and Topbuild is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Ameresco and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and Ameresco 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 Ameresco are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Ameresco i.e., Ameresco and Topbuild Corp go up and down completely randomly.

Pair Corralation between Ameresco and Topbuild Corp

Given the investment horizon of 90 days Ameresco is expected to under-perform the Topbuild Corp. In addition to that, Ameresco is 1.79 times more volatile than Topbuild Corp. It trades about -0.09 of its total potential returns per unit of risk. Topbuild Corp is currently generating about -0.07 per unit of volatility. If you would invest  39,202  in Topbuild Corp on September 15, 2024 and sell it today you would lose (4,775) from holding Topbuild Corp or give up 12.18% of portfolio value over 90 days.

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

Ameresco  vs.  Topbuild Corp

Ameresco

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ameresco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Topbuild Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Ameresco and Topbuild Corp

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

The idea behind Ameresco and Topbuild Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.