Correlation Between Summit Materials and DAIRY FARM
Can any of the company-specific risk be diversified away by investing in both Summit Materials and DAIRY FARM 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 DAIRY FARM into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and DAIRY FARM INTL, you can compare the effects of market volatilities on Summit Materials and DAIRY FARM 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 DAIRY FARM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and DAIRY FARM.
Diversification Opportunities for Summit Materials and DAIRY FARM
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and DAIRY is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and DAIRY FARM INTL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DAIRY FARM INTL 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 DAIRY FARM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DAIRY FARM INTL has no effect on the direction of Summit Materials i.e., Summit Materials and DAIRY FARM go up and down completely randomly.
Pair Corralation between Summit Materials and DAIRY FARM
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.96 times more return on investment than DAIRY FARM. However, Summit Materials is 1.96 times more volatile than DAIRY FARM INTL. It trades about 0.26 of its potential returns per unit of risk. DAIRY FARM INTL is currently generating about 0.25 per unit of risk. If you would invest 4,120 in Summit Materials on August 30, 2024 and sell it today you would earn a total of 700.00 from holding Summit Materials or generate 16.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. DAIRY FARM INTL
Performance |
| Timeline |
| Summit Materials |
| DAIRY FARM INTL |
Summit Materials and DAIRY FARM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and DAIRY FARM
The main advantage of trading using opposite Summit Materials and DAIRY FARM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, DAIRY FARM 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 DAIRY FARM will offset losses from the drop in DAIRY FARM's long position.| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
| DAIRY FARM vs. Apple Inc | DAIRY FARM vs. Apple Inc | DAIRY FARM vs. Superior Plus Corp | DAIRY FARM vs. SIVERS SEMICONDUCTORS AB |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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