Correlation Between Azek and Carrier Global

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

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

Diversification Opportunities for Azek and Carrier Global

0.36

Correlation Coefficient

Azek  Carrier Global

Weak diversification

The 3 months correlation between Azek and Carrier is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Azek Company and Carrier Global Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrier Global Corp and Azek 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 Azek Company are associated (or correlated) with Carrier Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrier Global Corp has no effect on the direction of Azek i.e., Azek and Carrier Global go up and down completely randomly.

Pair Corralation between Azek and Carrier Global

Given the investment horizon of 90 days Azek Company is expected to generate 1.01 times more return on investment than Carrier Global. However, Azek is 1.01 times more volatile than Carrier Global Corp. It trades about 0.22 of its potential returns per unit of risk. Carrier Global Corp is currently generating about 0.1 per unit of risk. If you would invest  4,134  in Azek Company on August 31, 2024 and sell it today you would earn a total of  1,092  from holding Azek Company or generate 26.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Azek Company  vs.  Carrier Global Corp

Azek Company

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Azek Company are ranked lower than 17 (%) 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.

Carrier Global Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Carrier Global Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Carrier Global may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Azek and Carrier Global

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

The idea behind Azek Company and Carrier Global 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.

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 Transaction History module to view history of all your transactions and understand their impact on performance.