Correlation Between Summit Materials and Focus Home
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Focus Home 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 Focus Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Focus Home Interactive, you can compare the effects of market volatilities on Summit Materials and Focus Home 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 Focus Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Focus Home.
Diversification Opportunities for Summit Materials and Focus Home
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Summit and Focus is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Focus Home Interactive in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Focus Home Interactive 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 are associated (or correlated) with Focus Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Focus Home Interactive has no effect on the direction of Summit Materials i.e., Summit Materials and Focus Home go up and down completely randomly.
Pair Corralation between Summit Materials and Focus Home
Assuming the 90 days trading horizon Summit Materials is expected to generate 0.27 times more return on investment than Focus Home. However, Summit Materials is 3.64 times less risky than Focus Home. It trades about 0.11 of its potential returns per unit of risk. Focus Home Interactive is currently generating about -0.28 per unit of risk. If you would invest 4,920 in Summit Materials on November 6, 2024 and sell it today you would earn a total of 80.00 from holding Summit Materials or generate 1.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Focus Home Interactive
Performance |
| Timeline |
| Summit Materials |
| Focus Home Interactive |
Summit Materials and Focus Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Focus Home
The main advantage of trading using opposite Summit Materials and Focus Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Focus Home 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 Focus Home will offset losses from the drop in Focus Home's long position.| Summit Materials vs. Pentair plc | Summit Materials vs. CarsalesCom | Summit Materials vs. Commercial Vehicle Group | Summit Materials vs. Air New Zealand |
| Focus Home vs. TERADATA | Focus Home vs. H2O Retailing | Focus Home vs. Alliance Data Systems | Focus Home vs. Cleanaway Waste Management |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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