Correlation Between DXP Enterprises and Foundation Building

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

By analyzing existing cross correlation between DXP Enterprises and Foundation Building Materials, you can compare the effects of market volatilities on DXP Enterprises and Foundation Building 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 DXP Enterprises with a short position of Foundation Building. Check out your portfolio center. Please also check ongoing floating volatility patterns of DXP Enterprises and Foundation Building.

Diversification Opportunities for DXP Enterprises and Foundation Building

0.0

Correlation Coefficient

DXP Enterprises  Foundation Building

Pay attention - limited upside

The 3 months correlation between DXP and Foundation is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding DXP Enterprises and Foundation Building Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foundation Building and DXP Enterprises 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 DXP Enterprises are associated (or correlated) with Foundation Building. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foundation Building has no effect on the direction of DXP Enterprises i.e., DXP Enterprises and Foundation Building go up and down completely randomly.

Pair Corralation between DXP Enterprises and Foundation Building

If you would invest  3,242  in DXP Enterprises on January 20, 2024 and sell it today you would earn a total of  1,773  from holding DXP Enterprises or generate 54.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

DXP Enterprises  vs.  Foundation Building Materials

DXP Enterprises

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DXP Enterprises are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, DXP Enterprises exhibited solid returns over the last few months and may actually be approaching a breakup point.

Foundation Building

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Foundation Building Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Foundation Building is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with DXP Enterprises and Foundation Building

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

The idea behind DXP Enterprises and Foundation Building Materials 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.