Correlation Between Topbuild Corp and Timken

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

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

Diversification Opportunities for Topbuild Corp and Timken

0.58

Correlation Coefficient

Topbuild Corp  Timken

Very weak diversification

The 3 months correlation between Topbuild and Timken is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Topbuild Corp and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Topbuild Corp i.e., Topbuild Corp and Timken go up and down completely randomly.

Pair Corralation between Topbuild Corp and Timken

Considering the 90-day investment horizon Topbuild Corp is expected to under-perform the Timken. In addition to that, Topbuild Corp is 2.35 times more volatile than Timken Company. It trades about -0.05 of its total potential returns per unit of risk. Timken Company is currently generating about 0.02 per unit of volatility. If you would invest  7,445  in Timken Company on September 19, 2024 and sell it today you would earn a total of  30.00  from holding Timken Company or generate 0.4% return on investment over 90 days.

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

Topbuild Corp  vs.  Timken Company

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 uncertain 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.

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's forward-looking signals remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Topbuild Corp and Timken

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

The idea behind Topbuild Corp and Timken Company 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.