Correlation Between Summit Materials and Bath Body
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Bath Body 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 Summit Materials and Bath Body into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials Cl and Bath Body Works, you can compare the effects of market volatilities on Summit Materials and Bath Body 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 Summit Materials with a short position of Bath Body. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Bath Body.
Diversification Opportunities for Summit Materials and Bath Body
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Bath is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Bath Body Works in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bath Body Works and Summit Materials 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 Summit Materials Cl are associated (or correlated) with Bath Body. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bath Body Works has no effect on the direction of Summit Materials i.e., Summit Materials and Bath Body go up and down completely randomly.
Pair Corralation between Summit Materials and Bath Body
Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 0.66 times more return on investment than Bath Body. However, Summit Materials Cl is 1.52 times less risky than Bath Body. It trades about 0.24 of its potential returns per unit of risk. Bath Body Works is currently generating about 0.1 per unit of risk. If you would invest 3,852 in Summit Materials Cl on October 12, 2024 and sell it today you would earn a total of 1,357 from holding Summit Materials Cl or generate 35.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.39% |
| Values | Daily Returns |
Summit Materials Cl vs. Bath Body Works
Performance |
| Timeline |
| Summit Materials |
| Bath Body Works |
Summit Materials and Bath Body Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Bath Body
The main advantage of trading using opposite Summit Materials and Bath Body positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Bath Body 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 Bath Body will offset losses from the drop in Bath Body's long position.| Summit Materials vs. Young Cos Brewery | Summit Materials vs. Adriatic Metals | Summit Materials vs. Gaztransport et Technigaz | Summit Materials vs. Alien Metals |
| Bath Body vs. Smithson Investment Trust | Bath Body vs. Tavistock Investments Plc | Bath Body vs. Primorus Investments plc | Bath Body vs. Foresight Environmental Infrastructure |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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