Correlation Between Armstrong World and Travis Perkins

Can any of the company-specific risk be diversified away by investing in both Armstrong World and Travis Perkins 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 Travis Perkins 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 Travis Perkins Plc, you can compare the effects of market volatilities on Armstrong World and Travis Perkins 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 Travis Perkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong World and Travis Perkins.

Diversification Opportunities for Armstrong World and Travis Perkins

0.0

Correlation Coefficient

Armstrong World  Travis Perkins

Pay attention - limited upside

The 3 months correlation between Armstrong and Travis is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong World Industries and Travis Perkins Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travis Perkins Plc 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 Travis Perkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travis Perkins Plc has no effect on the direction of Armstrong World i.e., Armstrong World and Travis Perkins go up and down completely randomly.

Pair Corralation between Armstrong World and Travis Perkins

If you would invest  14,009  in Armstrong World Industries on August 31, 2024 and sell it today you would earn a total of  2,013  from holding Armstrong World Industries or generate 14.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

Armstrong World Industries  vs.  Travis Perkins Plc

Armstrong World Indu

Risk-Adjusted Performance

27 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Armstrong World Industries are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Armstrong World demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Travis Perkins Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Travis Perkins Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking signals, Travis Perkins is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Armstrong World and Travis Perkins

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

The idea behind Armstrong World Industries and Travis Perkins Plc 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.

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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.