Correlation Between Summit Materials and Avon Protection
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Avon Protection 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 Avon Protection 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 Avon Protection PLC, you can compare the effects of market volatilities on Summit Materials and Avon Protection 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 Avon Protection. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Avon Protection.
Diversification Opportunities for Summit Materials and Avon Protection
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Avon is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Avon Protection PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avon Protection PLC 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 Avon Protection. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avon Protection PLC has no effect on the direction of Summit Materials i.e., Summit Materials and Avon Protection go up and down completely randomly.
Pair Corralation between Summit Materials and Avon Protection
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.42 times less return on investment than Avon Protection. In addition to that, Summit Materials is 1.07 times more volatile than Avon Protection PLC. It trades about 0.05 of its total potential returns per unit of risk. Avon Protection PLC is currently generating about 0.08 per unit of volatility. If you would invest 83,585 in Avon Protection PLC on September 12, 2024 and sell it today you would earn a total of 53,015 from holding Avon Protection PLC or generate 63.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.44% |
| Values | Daily Returns |
Summit Materials Cl vs. Avon Protection PLC
Performance |
| Timeline |
| Summit Materials |
| Avon Protection PLC |
Summit Materials and Avon Protection Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Avon Protection
The main advantage of trading using opposite Summit Materials and Avon Protection positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Avon Protection 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 Avon Protection will offset losses from the drop in Avon Protection's long position.| Summit Materials vs. Hong Kong Land | Summit Materials vs. Neometals | Summit Materials vs. Coor Service Management | Summit Materials vs. Fidelity Sustainable USD |
| Avon Protection vs. The Mercantile Investment | Avon Protection vs. Summit Materials Cl | Avon Protection vs. New Residential Investment | Avon Protection vs. Taylor Maritime Investments |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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