Correlation Between Belden and Comfort Systems

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

By analyzing existing cross correlation between Belden Inc and Comfort Systems USA, you can compare the effects of market volatilities on Belden and Comfort Systems 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 Belden with a short position of Comfort Systems. Check out your portfolio center. Please also check ongoing floating volatility patterns of Belden and Comfort Systems.

Diversification Opportunities for Belden and Comfort Systems

0.9

Correlation Coefficient

Belden  Comfort Systems

Almost no diversification

The 3 months correlation between Belden and Comfort is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Belden Inc and Comfort Systems USA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comfort Systems USA and Belden 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 Belden Inc are associated (or correlated) with Comfort Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comfort Systems USA has no effect on the direction of Belden i.e., Belden and Comfort Systems go up and down completely randomly.

Pair Corralation between Belden and Comfort Systems

Considering the 90-day investment horizon Belden Inc is expected to under-perform the Comfort Systems. But the stock apears to be less risky and, when comparing its historical volatility, Belden Inc is 1.5 times less risky than Comfort Systems. The stock trades about -0.32 of its potential returns per unit of risk. The Comfort Systems USA is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  31,825  in Comfort Systems USA on January 26, 2024 and sell it today you would lose (956.00) from holding Comfort Systems USA or give up 3.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Belden Inc  vs.  Comfort Systems USA

Belden Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Belden Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent fundamental indicators, Belden may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Comfort Systems USA

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Comfort Systems USA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Comfort Systems showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Belden and Comfort Systems

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

The idea behind Belden Inc and Comfort Systems USA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.