Correlation Between LIXIL and Quanex Building

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

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

Diversification Opportunities for LIXIL and Quanex Building

0.49

Correlation Coefficient

LIXIL  Quanex Building

Very weak diversification

The 3 months correlation between LIXIL and Quanex is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding LIXIL and Quanex Building Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quanex Building Products and LIXIL 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 LIXIL are associated (or correlated) with Quanex Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quanex Building Products has no effect on the direction of LIXIL i.e., LIXIL and Quanex Building go up and down completely randomly.

Pair Corralation between LIXIL and Quanex Building

If you would invest  2,520  in Quanex Building Products on September 4, 2024 and sell it today you would earn a total of  439.00  from holding Quanex Building Products or generate 17.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

LIXIL  vs.  Quanex Building Products

LIXIL

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LIXIL has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, LIXIL is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Quanex Building Products

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quanex Building Products are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Quanex Building showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LIXIL and Quanex Building

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

The idea behind LIXIL and Quanex Building Products 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.