Correlation Between Summit Materials and Freeport McMoRan
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Freeport McMoRan 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 Freeport McMoRan 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 Freeport McMoRan, you can compare the effects of market volatilities on Summit Materials and Freeport McMoRan 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 Freeport McMoRan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Freeport McMoRan.
Diversification Opportunities for Summit Materials and Freeport McMoRan
-0.83 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Summit and Freeport is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Freeport McMoRan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeport McMoRan 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 Freeport McMoRan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeport McMoRan has no effect on the direction of Summit Materials i.e., Summit Materials and Freeport McMoRan go up and down completely randomly.
Pair Corralation between Summit Materials and Freeport McMoRan
Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 0.99 times more return on investment than Freeport McMoRan. However, Summit Materials Cl is 1.01 times less risky than Freeport McMoRan. It trades about 0.06 of its potential returns per unit of risk. Freeport McMoRan is currently generating about 0.01 per unit of risk. If you would invest 2,966 in Summit Materials Cl on September 23, 2024 and sell it today you would earn a total of 2,084 from holding Summit Materials Cl or generate 70.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 91.82% |
| Values | Daily Returns |
Summit Materials Cl vs. Freeport McMoRan
Performance |
| Timeline |
| Summit Materials |
| Freeport McMoRan |
Summit Materials and Freeport McMoRan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Freeport McMoRan
The main advantage of trading using opposite Summit Materials and Freeport McMoRan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Freeport McMoRan 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 Freeport McMoRan will offset losses from the drop in Freeport McMoRan's long position.| Summit Materials vs. Addtech | Summit Materials vs. Ashtead Technology Holdings | Summit Materials vs. British American Tobacco | Summit Materials vs. Universal Display Corp |
| Freeport McMoRan vs. Uniper SE | Freeport McMoRan vs. Mulberry Group PLC | Freeport McMoRan vs. London Security Plc | Freeport McMoRan vs. Triad Group PLC |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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