Correlation Between Armstrong Flooring and Alpha Pro

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

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

Diversification Opportunities for Armstrong Flooring and Alpha Pro

0.37

Correlation Coefficient

Armstrong Flooring  Alpha Pro

Weak diversification

The 3 months correlation between Armstrong and Alpha is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong Flooring and Alpha Pro Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Pro Tech and Armstrong Flooring 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 Armstrong Flooring are associated (or correlated) with Alpha Pro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Pro Tech has no effect on the direction of Armstrong Flooring i.e., Armstrong Flooring and Alpha Pro go up and down completely randomly.

Pair Corralation between Armstrong Flooring and Alpha Pro

Considering the 90-day investment horizon Armstrong Flooring is expected to generate 27.81 times more return on investment than Alpha Pro. However, Armstrong Flooring is 27.81 times more volatile than Alpha Pro Tech. It trades about 0.13 of its potential returns per unit of risk. Alpha Pro Tech is currently generating about 0.05 per unit of risk. If you would invest  40.00  in Armstrong Flooring on January 20, 2024 and sell it today you would lose (5.00) from holding Armstrong Flooring or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	3.23%
Values	Daily Returns

Armstrong Flooring  vs.  Alpha Pro Tech

Armstrong Flooring

Risk-Adjusted Performance

0 of 100

Very Weak

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

Alpha Pro Tech

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Pro Tech are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Alpha Pro unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armstrong Flooring and Alpha Pro

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

The idea behind Armstrong Flooring and Alpha Pro Tech 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.