Correlation Between Cornerstone Building and Indigo Books

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

By analyzing existing cross correlation between Cornerstone Building Brands and Indigo Books Music, you can compare the effects of market volatilities on Cornerstone Building and Indigo Books 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 Cornerstone Building with a short position of Indigo Books. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cornerstone Building and Indigo Books.

Diversification Opportunities for Cornerstone Building and Indigo Books

0.49

Correlation Coefficient

Cornerstone Building  Indigo Books

Very weak diversification

The 3 months correlation between Cornerstone and Indigo is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cornerstone Building Brands and Indigo Books Music in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indigo Books Music and Cornerstone Building 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 Cornerstone Building Brands are associated (or correlated) with Indigo Books. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indigo Books Music has no effect on the direction of Cornerstone Building i.e., Cornerstone Building and Indigo Books go up and down completely randomly.

Pair Corralation between Cornerstone Building and Indigo Books

If you would invest  150.00  in Indigo Books Music on February 18, 2024 and sell it today you would earn a total of  30.00  from holding Indigo Books Music or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Cornerstone Building Brands  vs.  Indigo Books Music

Cornerstone Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cornerstone Building Brands has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Cornerstone Building is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Indigo Books Music

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Indigo Books Music are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental drivers, Indigo Books reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cornerstone Building and Indigo Books

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

The idea behind Cornerstone Building Brands and Indigo Books Music 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.