Correlation Between Beacon Roofing and PGT Innovations

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

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

Diversification Opportunities for Beacon Roofing and PGT Innovations

0.75

Correlation Coefficient

Beacon Roofing  PGT Innovations

Poor diversification

The 3 months correlation between Beacon and PGT is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Beacon Roofing Supply and PGT Innovations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PGT Innovations and Beacon Roofing 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 Beacon Roofing Supply are associated (or correlated) with PGT Innovations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PGT Innovations has no effect on the direction of Beacon Roofing i.e., Beacon Roofing and PGT Innovations go up and down completely randomly.

Pair Corralation between Beacon Roofing and PGT Innovations

If you would invest  8,613  in Beacon Roofing Supply on September 3, 2024 and sell it today you would earn a total of  2,689  from holding Beacon Roofing Supply or generate 31.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

Beacon Roofing Supply  vs.  PGT Innovations

Beacon Roofing Supply

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Beacon Roofing Supply are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Beacon Roofing displayed solid returns over the last few months and may actually be approaching a breakup point.

PGT Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGT Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, PGT Innovations is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Beacon Roofing and PGT Innovations

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

The idea behind Beacon Roofing Supply and PGT Innovations 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.