Correlation Between PGT Innovations and Masco

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

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

Diversification Opportunities for PGT Innovations and Masco

-0.05

Correlation Coefficient

PGT Innovations  Masco

Good diversification

The 3 months correlation between PGT and Masco is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PGT Innovations and Masco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Masco and PGT Innovations 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 PGT Innovations are associated (or correlated) with Masco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Masco has no effect on the direction of PGT Innovations i.e., PGT Innovations and Masco go up and down completely randomly.

Pair Corralation between PGT Innovations and Masco

Given the investment horizon of 90 days PGT Innovations is expected to generate 3.72 times less return on investment than Masco. But when comparing it to its historical volatility, PGT Innovations is 1.04 times less risky than Masco. It trades about 0.02 of its potential returns per unit of risk. Masco is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  5,260  in Masco on September 1, 2024 and sell it today you would earn a total of  2,796  from holding Masco or generate 53.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	8.33%
Values	Daily Returns

PGT Innovations  vs.  Masco

PGT Innovations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PGT Innovations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, PGT Innovations is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Masco

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Masco are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Masco is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with PGT Innovations and Masco

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

The idea behind PGT Innovations and Masco 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.