Correlation Between Apogee Enterprises and Azek

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

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

Diversification Opportunities for Apogee Enterprises and Azek

0.6

Correlation Coefficient

Apogee Enterprises  Azek

Poor diversification

The 3 months correlation between Apogee and Azek is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Apogee Enterprises and Azek Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Azek Company and Apogee Enterprises 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 Apogee Enterprises are associated (or correlated) with Azek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Azek Company has no effect on the direction of Apogee Enterprises i.e., Apogee Enterprises and Azek go up and down completely randomly.

Pair Corralation between Apogee Enterprises and Azek

Given the investment horizon of 90 days Apogee Enterprises is expected to generate 1.95 times more return on investment than Azek. However, Apogee Enterprises is 1.95 times more volatile than Azek Company. It trades about 0.14 of its potential returns per unit of risk. Azek Company is currently generating about 0.24 per unit of risk. If you would invest  6,382  in Apogee Enterprises on September 2, 2024 and sell it today you would earn a total of  2,039  from holding Apogee Enterprises or generate 31.95% return on investment over 90 days.

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

Apogee Enterprises  vs.  Azek Company

Apogee Enterprises

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apogee Enterprises are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Apogee Enterprises reported solid returns over the last few months and may actually be approaching a breakup point.

Azek Company

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Azek Company are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Azek disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Apogee Enterprises and Azek

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

The idea behind Apogee Enterprises and Azek Company 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.