Correlation Between Summit Materials and Inspiration Healthcare
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Inspiration Healthcare 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 Inspiration Healthcare 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 Inspiration Healthcare Group, you can compare the effects of market volatilities on Summit Materials and Inspiration Healthcare 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 Inspiration Healthcare. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Inspiration Healthcare.
Diversification Opportunities for Summit Materials and Inspiration Healthcare
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Summit and Inspiration is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Inspiration Healthcare Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inspiration Healthcare 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 Inspiration Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inspiration Healthcare has no effect on the direction of Summit Materials i.e., Summit Materials and Inspiration Healthcare go up and down completely randomly.
Pair Corralation between Summit Materials and Inspiration Healthcare
Assuming the 90 days trading horizon Summit Materials is expected to generate 15.19 times less return on investment than Inspiration Healthcare. But when comparing it to its historical volatility, Summit Materials Cl is 37.33 times less risky than Inspiration Healthcare. It trades about 0.31 of its potential returns per unit of risk. Inspiration Healthcare Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 1,250 in Inspiration Healthcare Group on November 25, 2024 and sell it today you would earn a total of 700.00 from holding Inspiration Healthcare Group or generate 56.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 70.73% |
Values | Daily Returns |
Summit Materials Cl vs. Inspiration Healthcare Group
Performance |
Timeline |
Summit Materials |
Risk-Adjusted Performance
Good
Weak | Strong |
Inspiration Healthcare |
Summit Materials and Inspiration Healthcare Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Materials and Inspiration Healthcare
The main advantage of trading using opposite Summit Materials and Inspiration Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Inspiration Healthcare 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 Inspiration Healthcare will offset losses from the drop in Inspiration Healthcare's long position.Summit Materials vs. Monster Beverage Corp | ||
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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