Correlation Between Topbuild Corp and GE Vernova

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

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

Diversification Opportunities for Topbuild Corp and GE Vernova

-0.63

Correlation Coefficient

Topbuild Corp  GE Vernova

Excellent diversification

The 3 months correlation between Topbuild and GEV is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and GE Vernova LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GE Vernova LLC 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 GE Vernova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GE Vernova LLC has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and GE Vernova go up and down completely randomly.

Pair Corralation between Topbuild Corp and GE Vernova

Considering the 90-day investment horizon Topbuild Corp is expected to under-perform the GE Vernova. But the stock apears to be less risky and, when comparing its historical volatility, Topbuild Corp is 1.11 times less risky than GE Vernova. The stock trades about -0.16 of its potential returns per unit of risk. The GE Vernova LLC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  25,529  in GE Vernova LLC on September 24, 2024 and sell it today you would earn a total of  8,876  from holding GE Vernova LLC or generate 34.77% return on investment over 90 days.

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

Topbuild Corp  vs.  GE Vernova LLC

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.

GE Vernova LLC

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GE Vernova LLC are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain technical and fundamental indicators, GE Vernova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Topbuild Corp and GE Vernova

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

The idea behind Topbuild Corp and GE Vernova LLC 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.