Correlation Between Core Molding and Armstrong World

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

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

Diversification Opportunities for Core Molding and Armstrong World

-0.09

Correlation Coefficient

Core Molding  Armstrong World

Good diversification

The 3 months correlation between Core and Armstrong is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Core Molding Technologies and Armstrong World Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armstrong World Indu and Core Molding 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 Core Molding Technologies are associated (or correlated) with Armstrong World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armstrong World Indu has no effect on the direction of Core Molding i.e., Core Molding and Armstrong World go up and down completely randomly.

Pair Corralation between Core Molding and Armstrong World

Considering the 90-day investment horizon Core Molding Technologies is expected to under-perform the Armstrong World. In addition to that, Core Molding is 2.89 times more volatile than Armstrong World Industries. It trades about -0.05 of its total potential returns per unit of risk. Armstrong World Industries is currently generating about -0.08 per unit of volatility. If you would invest  12,143  in Armstrong World Industries on March 12, 2024 and sell it today you would lose (692.00) from holding Armstrong World Industries or give up 5.7% of portfolio value over 90 days.

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

Core Molding Technologies  vs.  Armstrong World Industries

Core Molding Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Core Molding Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Armstrong World Indu

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Core Molding and Armstrong World

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

The idea behind Core Molding Technologies and Armstrong World 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.