Correlation Between Installed Building and Enpro Industries

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

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

Diversification Opportunities for Installed Building and Enpro Industries

0.02

Correlation Coefficient

Installed Building  Enpro Industries

Significant diversification

The 3 months correlation between Installed and Enpro is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Installed Building Products and Enpro Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enpro Industries and Installed Building 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 Installed Building Products are associated (or correlated) with Enpro Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enpro Industries has no effect on the direction of Installed Building i.e., Installed Building and Enpro Industries go up and down completely randomly.

Pair Corralation between Installed Building and Enpro Industries

Considering the 90-day investment horizon Installed Building is expected to generate 2.06 times less return on investment than Enpro Industries. In addition to that, Installed Building is 1.29 times more volatile than Enpro Industries. It trades about 0.07 of its total potential returns per unit of risk. Enpro Industries is currently generating about 0.18 per unit of volatility. If you would invest  15,095  in Enpro Industries on September 2, 2024 and sell it today you would earn a total of  3,815  from holding Enpro Industries or generate 25.27% return on investment over 90 days.

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

Installed Building Products  vs.  Enpro Industries

Installed Building

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Installed Building Products are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, Installed Building may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Enpro Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enpro Industries are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Enpro Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Installed Building and Enpro Industries

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

The idea behind Installed Building Products and Enpro 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.