Correlation Between Grupo Lamosa and TopBuild Corp

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

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

Diversification Opportunities for Grupo Lamosa and TopBuild Corp

-0.49

Correlation Coefficient

Grupo Lamosa  TopBuild Corp

Very good diversification

The 3 months correlation between Grupo and TopBuild is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Grupo Lamosa SAB and TopBuild Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TopBuild Corp and Grupo Lamosa 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 Grupo Lamosa SAB 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 Grupo Lamosa i.e., Grupo Lamosa and TopBuild Corp go up and down completely randomly.

Pair Corralation between Grupo Lamosa and TopBuild Corp

Assuming the 90 days trading horizon Grupo Lamosa SAB is expected to under-perform the TopBuild Corp. But the stock apears to be less risky and, when comparing its historical volatility, Grupo Lamosa SAB is 17.64 times less risky than TopBuild Corp. The stock trades about -0.1 of its potential returns per unit of risk. The TopBuild Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  427,000  in TopBuild Corp on September 2, 2024 and sell it today you would earn a total of  383,759  from holding TopBuild Corp or generate 89.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Grupo Lamosa SAB  vs.  TopBuild Corp

Grupo Lamosa SAB

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grupo Lamosa SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Grupo Lamosa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

TopBuild Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TopBuild Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, TopBuild Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grupo Lamosa and TopBuild Corp

The main advantage of trading using opposite Grupo Lamosa and TopBuild Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grupo Lamosa 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 Grupo Lamosa SAB 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.

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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.