Correlation Between Summit Materials and BRIT AMER
Can any of the company-specific risk be diversified away by investing in both Summit Materials and BRIT AMER 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 BRIT AMER into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and BRIT AMER TOBACCO, you can compare the effects of market volatilities on Summit Materials and BRIT AMER 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 BRIT AMER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and BRIT AMER.
Diversification Opportunities for Summit Materials and BRIT AMER
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and BRIT is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and BRIT AMER TOBACCO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRIT AMER TOBACCO 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 BRIT AMER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRIT AMER TOBACCO has no effect on the direction of Summit Materials i.e., Summit Materials and BRIT AMER go up and down completely randomly.
Pair Corralation between Summit Materials and BRIT AMER
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.83 times more return on investment than BRIT AMER. However, Summit Materials is 1.83 times more volatile than BRIT AMER TOBACCO. It trades about 0.06 of its potential returns per unit of risk. BRIT AMER TOBACCO is currently generating about 0.05 per unit of risk. If you would invest 2,820 in Summit Materials on November 9, 2024 and sell it today you would earn a total of 2,180 from holding Summit Materials or generate 77.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. BRIT AMER TOBACCO
Performance |
| Timeline |
| Summit Materials |
| BRIT AMER TOBACCO |
Summit Materials and BRIT AMER Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and BRIT AMER
The main advantage of trading using opposite Summit Materials and BRIT AMER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, BRIT AMER 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 BRIT AMER will offset losses from the drop in BRIT AMER's long position.| Summit Materials vs. Spirent Communications plc | Summit Materials vs. GMO Internet | Summit Materials vs. Tradeweb Markets | Summit Materials vs. SIDETRADE EO 1 |
| BRIT AMER vs. GEELY AUTOMOBILE | BRIT AMER vs. MCEWEN MINING INC | BRIT AMER vs. MAGNUM MINING EXP | BRIT AMER vs. Evolution Mining Limited |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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