Correlation Between Summit Materials and Herald Investment
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Herald Investment 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 Herald Investment 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 Herald Investment Trust, you can compare the effects of market volatilities on Summit Materials and Herald Investment 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 Herald Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Herald Investment.
Diversification Opportunities for Summit Materials and Herald Investment
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Herald is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Herald Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Herald Investment Trust 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 Herald Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Herald Investment Trust has no effect on the direction of Summit Materials i.e., Summit Materials and Herald Investment go up and down completely randomly.
Pair Corralation between Summit Materials and Herald Investment
Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 2.58 times more return on investment than Herald Investment. However, Summit Materials is 2.58 times more volatile than Herald Investment Trust. It trades about 0.16 of its potential returns per unit of risk. Herald Investment Trust is currently generating about 0.15 per unit of risk. If you would invest 3,999 in Summit Materials Cl on August 31, 2024 and sell it today you would earn a total of 1,093 from holding Summit Materials Cl or generate 27.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials Cl vs. Herald Investment Trust
Performance |
| Timeline |
| Summit Materials |
| Herald Investment Trust |
Summit Materials and Herald Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Herald Investment
The main advantage of trading using opposite Summit Materials and Herald Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Herald Investment 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 Herald Investment will offset losses from the drop in Herald Investment's long position.| Summit Materials vs. The Mercantile Investment | Summit Materials vs. National Beverage Corp | Summit Materials vs. Capital Drilling | Summit Materials vs. Bankers Investment Trust |
| Herald Investment vs. Alaska Air Group | Herald Investment vs. Public Storage | Herald Investment vs. JD Sports Fashion | Herald Investment vs. Datagroup SE |
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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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