Correlation Between Topbuild Corp and Codexis

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

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

Diversification Opportunities for Topbuild Corp and Codexis

-0.54

Correlation Coefficient

Topbuild Corp  Codexis

Excellent diversification

The 3 months correlation between Topbuild and Codexis is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis and Topbuild Corp 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 Topbuild Corp are associated (or correlated) with Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Codexis go up and down completely randomly.

Pair Corralation between Topbuild Corp and Codexis

Considering the 90-day investment horizon Topbuild Corp is expected to under-perform the Codexis. But the stock apears to be less risky and, when comparing its historical volatility, Topbuild Corp is 1.76 times less risky than Codexis. The stock trades about -0.16 of its potential returns per unit of risk. The Codexis is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  292.00  in Codexis on September 22, 2024 and sell it today you would earn a total of  236.00  from holding Codexis or generate 80.82% return on investment over 90 days.

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

Topbuild Corp  vs.  Codexis

Topbuild Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topbuild Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Codexis

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topbuild Corp and Codexis

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

The idea behind Topbuild Corp and Codexis 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.