Correlation Between AdvanSix and Resideo Technologies

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

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

Diversification Opportunities for AdvanSix and Resideo Technologies

0.45

Correlation Coefficient

AdvanSix  Resideo Technologies

Very weak diversification

The 3 months correlation between AdvanSix and Resideo is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding AdvanSix and Resideo Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Resideo Technologies and AdvanSix 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 AdvanSix are associated (or correlated) with Resideo Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Resideo Technologies has no effect on the direction of AdvanSix i.e., AdvanSix and Resideo Technologies go up and down completely randomly.

Pair Corralation between AdvanSix and Resideo Technologies

Given the investment horizon of 90 days AdvanSix is expected to under-perform the Resideo Technologies. But the stock apears to be less risky and, when comparing its historical volatility, AdvanSix is 1.22 times less risky than Resideo Technologies. The stock trades about -0.05 of its potential returns per unit of risk. The Resideo Technologies is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,014  in Resideo Technologies on September 30, 2024 and sell it today you would earn a total of  334.00  from holding Resideo Technologies or generate 16.58% return on investment over 90 days.

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

AdvanSix  vs.  Resideo Technologies

AdvanSix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AdvanSix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, AdvanSix is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Resideo Technologies

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Resideo Technologies are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Resideo Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AdvanSix and Resideo Technologies

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

The idea behind AdvanSix and Resideo Technologies 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.