Correlation Between Edgewell Personal and Topbuild Corp

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

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

Diversification Opportunities for Edgewell Personal and Topbuild Corp

0.34

Correlation Coefficient

Edgewell Personal  Topbuild Corp

Weak diversification

The 3 months correlation between Edgewell and Topbuild is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Edgewell Personal Care and Topbuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topbuild Corp and Edgewell Personal 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 Edgewell Personal Care are associated (or correlated) with Topbuild Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topbuild Corp has no effect on the direction of Edgewell Personal i.e., Edgewell Personal and Topbuild Corp go up and down completely randomly.

Pair Corralation between Edgewell Personal and Topbuild Corp

Considering the 90-day investment horizon Edgewell Personal Care is expected to generate 0.56 times more return on investment than Topbuild Corp. However, Edgewell Personal Care is 1.8 times less risky than Topbuild Corp. It trades about 0.03 of its potential returns per unit of risk. Topbuild Corp is currently generating about -0.05 per unit of risk. If you would invest  3,474  in Edgewell Personal Care on September 19, 2024 and sell it today you would earn a total of  31.00  from holding Edgewell Personal Care or generate 0.89% return on investment over 90 days.

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

Edgewell Personal Care  vs.  Topbuild Corp

Edgewell Personal Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewell Personal Care has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Edgewell Personal is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with Edgewell Personal and Topbuild Corp

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

The idea behind Edgewell Personal Care and Topbuild Corp 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.