Correlation Between Armstrong Flooring and Owens Corning

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Can any of the company-specific risk be diversified away by investing in both Armstrong Flooring 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 Armstrong Flooring and Owens Corning into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Armstrong Flooring and Owens Corning, you can compare the effects of market volatilities on Armstrong Flooring 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 Armstrong Flooring with a short position of Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armstrong Flooring and Owens Corning.

Diversification Opportunities for Armstrong Flooring and Owens Corning

-0.4
  Correlation Coefficient

Very good diversification

The 3 months correlation between Armstrong and Owens is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Armstrong Flooring and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 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 Armstrong Flooring i.e., Armstrong Flooring and Owens Corning go up and down completely randomly.

Pair Corralation between Armstrong Flooring and Owens Corning

If you would invest  14,832  in Owens Corning on December 29, 2023 and sell it today you would earn a total of  1,889  from holding Owens Corning or generate 12.74% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy4.55%
ValuesDaily Returns

Armstrong Flooring  vs.  Owens Corning

 Performance 
       Timeline  
Armstrong Flooring 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 current stock price confusion, may contribute to short-horizon losses for the traders.
Owens Corning 

Risk-Adjusted Performance

9 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Owens Corning are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal fundamental indicators, Owens Corning exhibited solid returns over the last few months and may actually be approaching a breakup point.

Armstrong Flooring and Owens Corning Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Armstrong Flooring and Owens Corning

The main advantage of trading using opposite Armstrong Flooring and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armstrong Flooring 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 Armstrong Flooring 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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