Correlation Between Quanex Building and HNI Corp

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

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

Diversification Opportunities for Quanex Building and HNI Corp

0.8

Correlation Coefficient

Quanex Building  HNI Corp

Very poor diversification

The 3 months correlation between Quanex and HNI is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Quanex Building Products and HNI Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HNI Corp and Quanex 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 Quanex Building Products are associated (or correlated) with HNI Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HNI Corp has no effect on the direction of Quanex Building i.e., Quanex Building and HNI Corp go up and down completely randomly.

Pair Corralation between Quanex Building and HNI Corp

Allowing for the 90-day total investment horizon Quanex Building Products is expected to under-perform the HNI Corp. In addition to that, Quanex Building is 1.53 times more volatile than HNI Corp. It trades about -0.04 of its total potential returns per unit of risk. HNI Corp is currently generating about -0.03 per unit of volatility. If you would invest  4,389  in HNI Corp on January 31, 2024 and sell it today you would lose (90.00) from holding HNI Corp or give up 2.05% of portfolio value over 90 days.

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

Quanex Building Products  vs.  HNI Corp

Quanex Building Products

Risk-Adjusted Performance

6 of 100

Insignificant

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

HNI Corp

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HNI Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, HNI Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Quanex Building and HNI Corp

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

The idea behind Quanex Building Products and HNI Corp 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 CEOs Directory module to screen CEOs from public companies around the world.