Correlation Between Tempur Sealy and Owens Corning
Can any of the company-specific risk be diversified away by investing in both Tempur Sealy and Owens Corning 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 Tempur Sealy and Owens Corning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tempur Sealy International and Owens Corning, you can compare the effects of market volatilities on Tempur Sealy and Owens Corning 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 Tempur Sealy with a short position of Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tempur Sealy and Owens Corning.
Diversification Opportunities for Tempur Sealy and Owens Corning
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Tempur and Owens is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tempur Sealy International and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning and Tempur Sealy 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 Tempur Sealy International are associated (or correlated) with Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of Tempur Sealy i.e., Tempur Sealy and Owens Corning go up and down completely randomly.
Pair Corralation between Tempur Sealy and Owens Corning
Considering the 90-day investment horizon Tempur Sealy International is expected to under-perform the Owens Corning. But the stock apears to be less risky and, when comparing its historical volatility, Tempur Sealy International is 1.08 times less risky than Owens Corning. The stock trades about -0.45 of its potential returns per unit of risk. The Owens Corning is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 16,545 in Owens Corning on January 24, 2024 and sell it today you would lose (101.00) from holding Owens Corning or give up 0.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
Tempur Sealy International vs. Owens Corning
Performance |
| Timeline |
| Tempur Sealy Interna |
| Owens Corning |
Tempur Sealy and Owens Corning Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tempur Sealy and Owens Corning
The main advantage of trading using opposite Tempur Sealy and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tempur Sealy position performs unexpectedly, Owens Corning 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 Owens Corning will offset losses from the drop in Owens Corning's long position.The idea behind Tempur Sealy International and Owens Corning 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.| Owens Corning vs. Janus International Group | Owens Corning vs. Interface | Owens Corning vs. Beacon Roofing Supply | Owens Corning vs. Perma Pipe International Holdings |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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