Correlation Between Mueller Industries and Tredegar

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

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

Diversification Opportunities for Mueller Industries and Tredegar

0.56

Correlation Coefficient

Mueller Industries  Tredegar

Very weak diversification

The 3 months correlation between Mueller and Tredegar is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Mueller Industries and Tredegar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tredegar and Mueller Industries 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 Mueller Industries are associated (or correlated) with Tredegar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tredegar has no effect on the direction of Mueller Industries i.e., Mueller Industries and Tredegar go up and down completely randomly.

Pair Corralation between Mueller Industries and Tredegar

Considering the 90-day investment horizon Mueller Industries is expected to generate 1.1 times less return on investment than Tredegar. But when comparing it to its historical volatility, Mueller Industries is 1.28 times less risky than Tredegar. It trades about 0.1 of its potential returns per unit of risk. Tredegar is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  608.00  in Tredegar on September 2, 2024 and sell it today you would earn a total of  109.00  from holding Tredegar or generate 17.93% return on investment over 90 days.

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

Mueller Industries  vs.  Tredegar

Mueller Industries

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mueller Industries are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating essential indicators, Mueller Industries demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tredegar

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tredegar are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Tredegar reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mueller Industries and Tredegar

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

The idea behind Mueller Industries and Tredegar 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.