Correlation Between Summit Materials and International Biotechnology
Can any of the company-specific risk be diversified away by investing in both Summit Materials and International Biotechnology 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 International Biotechnology 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 International Biotechnology Trust, you can compare the effects of market volatilities on Summit Materials and International Biotechnology 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 International Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and International Biotechnology.
Diversification Opportunities for Summit Materials and International Biotechnology
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and International is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and International Biotechnology Tr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Biotechnology 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 International Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Biotechnology has no effect on the direction of Summit Materials i.e., Summit Materials and International Biotechnology go up and down completely randomly.
Pair Corralation between Summit Materials and International Biotechnology
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.21 times less return on investment than International Biotechnology. But when comparing it to its historical volatility, Summit Materials Cl is 2.3 times less risky than International Biotechnology. It trades about 0.29 of its potential returns per unit of risk. International Biotechnology Trust is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 69,000 in International Biotechnology Trust on November 7, 2024 and sell it today you would earn a total of 2,400 from holding International Biotechnology Trust or generate 3.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 86.96% |
| Values | Daily Returns |
Summit Materials Cl vs. International Biotechnology Tr
Performance |
| Timeline |
| Summit Materials |
| International Biotechnology |
Summit Materials and International Biotechnology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and International Biotechnology
The main advantage of trading using opposite Summit Materials and International Biotechnology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, International Biotechnology 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 International Biotechnology will offset losses from the drop in International Biotechnology's long position.| Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Samsung Electronics Co | Summit Materials vs. Toyota Motor Corp | Summit Materials 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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