Correlation Between Armstrong World and Compagnie

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

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

Diversification Opportunities for Armstrong World and Compagnie

0.35

Correlation Coefficient

Armstrong World  Compagnie

Weak diversification

The 3 months correlation between Armstrong and Compagnie is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Compagnie de Saint Gobain in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compagnie de Saint and Armstrong World 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 Armstrong World Industries are associated (or correlated) with Compagnie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compagnie de Saint has no effect on the direction of Armstrong World i.e., Armstrong World and Compagnie go up and down completely randomly.

Pair Corralation between Armstrong World and Compagnie

Considering the 90-day investment horizon Armstrong World Industries is expected to generate 0.92 times more return on investment than Compagnie. However, Armstrong World Industries is 1.09 times less risky than Compagnie. It trades about 0.1 of its potential returns per unit of risk. Compagnie de Saint Gobain is currently generating about -0.03 per unit of risk. If you would invest  13,211  in Armstrong World Industries on September 22, 2024 and sell it today you would earn a total of  1,077  from holding Armstrong World Industries or generate 8.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.46%
Values	Daily Returns

Armstrong World Industries  vs.  Compagnie de Saint Gobain

Armstrong World Indu

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Armstrong World Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Armstrong World may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Compagnie de Saint

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Armstrong World and Compagnie

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

The idea behind Armstrong World Industries and Compagnie de Saint Gobain 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.