Correlation Between Topbuild Corp and Thor Industries

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

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

Diversification Opportunities for Topbuild Corp and Thor Industries

0.7

Correlation Coefficient

Topbuild Corp  Thor Industries

Poor diversification

The 3 months correlation between Topbuild and Thor is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Thor Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Thor Industries 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 Thor Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Thor Industries has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Thor Industries go up and down completely randomly.

Pair Corralation between Topbuild Corp and Thor Industries

Considering the 90-day investment horizon Topbuild Corp is expected to under-perform the Thor Industries. In addition to that, Topbuild Corp is 1.17 times more volatile than Thor Industries. It trades about -0.54 of its total potential returns per unit of risk. Thor Industries is currently generating about -0.48 per unit of volatility. If you would invest  11,315  in Thor Industries on September 27, 2024 and sell it today you would lose (1,731) from holding Thor Industries or give up 15.3% of portfolio value over 90 days.

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

Topbuild Corp  vs.  Thor Industries

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.

Thor Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Thor Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Topbuild Corp and Thor Industries

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

The idea behind Topbuild Corp and Thor Industries 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.