Correlation Between MasterBrand and Mohawk Industries

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

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

Diversification Opportunities for MasterBrand and Mohawk Industries

0.26

Correlation Coefficient

MasterBrand  Mohawk Industries

Modest diversification

The 3 months correlation between MasterBrand and Mohawk is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding MasterBrand and Mohawk Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mohawk Industries and MasterBrand 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 MasterBrand are associated (or correlated) with Mohawk Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mohawk Industries has no effect on the direction of MasterBrand i.e., MasterBrand and Mohawk Industries go up and down completely randomly.

Pair Corralation between MasterBrand and Mohawk Industries

Considering the 90-day investment horizon MasterBrand is expected to generate 0.87 times more return on investment than Mohawk Industries. However, MasterBrand is 1.15 times less risky than Mohawk Industries. It trades about 0.07 of its potential returns per unit of risk. Mohawk Industries is currently generating about -0.05 per unit of risk. If you would invest  1,589  in MasterBrand on September 4, 2024 and sell it today you would earn a total of  143.00  from holding MasterBrand or generate 9.0% return on investment over 90 days.

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

MasterBrand  vs.  Mohawk Industries

MasterBrand

Risk-Adjusted Performance

5 of 100

OK

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

Mohawk Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mohawk Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with MasterBrand and Mohawk Industries

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

The idea behind MasterBrand and Mohawk 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.