Correlation Between Summit Materials and Molson Coors
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Molson Coors 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 Molson Coors 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 Molson Coors Beverage, you can compare the effects of market volatilities on Summit Materials and Molson Coors 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 Molson Coors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Molson Coors.
Diversification Opportunities for Summit Materials and Molson Coors
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and Molson is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Molson Coors Beverage in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molson Coors Beverage 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 Molson Coors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molson Coors Beverage has no effect on the direction of Summit Materials i.e., Summit Materials and Molson Coors go up and down completely randomly.
Pair Corralation between Summit Materials and Molson Coors
Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 1.32 times more return on investment than Molson Coors. However, Summit Materials is 1.32 times more volatile than Molson Coors Beverage. It trades about 0.05 of its potential returns per unit of risk. Molson Coors Beverage is currently generating about 0.03 per unit of risk. If you would invest 3,400 in Summit Materials Cl on September 19, 2024 and sell it today you would earn a total of 1,680 from holding Summit Materials Cl or generate 49.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 96.96% |
| Values | Daily Returns |
Summit Materials Cl vs. Molson Coors Beverage
Performance |
| Timeline |
| Summit Materials |
| Molson Coors Beverage |
Summit Materials and Molson Coors Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Molson Coors
The main advantage of trading using opposite Summit Materials and Molson Coors positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Molson Coors 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 Molson Coors will offset losses from the drop in Molson Coors' long position.| Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Hyundai Motor | Summit Materials vs. Reliance Industries Ltd |
| Molson Coors vs. Samsung Electronics Co | Molson Coors vs. Samsung Electronics Co | Molson Coors vs. Hyundai Motor | Molson Coors vs. Reliance Industries Ltd |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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