Correlation Between Summit Materials and NVIDIA
Can any of the company-specific risk be diversified away by investing in both Summit Materials and NVIDIA 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 NVIDIA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and NVIDIA, you can compare the effects of market volatilities on Summit Materials and NVIDIA 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 NVIDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and NVIDIA.
Diversification Opportunities for Summit Materials and NVIDIA
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and NVIDIA is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and NVIDIA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NVIDIA 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 NVIDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NVIDIA has no effect on the direction of Summit Materials i.e., Summit Materials and NVIDIA go up and down completely randomly.
Pair Corralation between Summit Materials and NVIDIA
Assuming the 90 days trading horizon Summit Materials is expected to generate 2.88 times less return on investment than NVIDIA. But when comparing it to its historical volatility, Summit Materials is 2.35 times less risky than NVIDIA. It trades about 0.06 of its potential returns per unit of risk. NVIDIA is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 13,078 in NVIDIA on October 11, 2024 and sell it today you would earn a total of 434.00 from holding NVIDIA or generate 3.32% 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. NVIDIA
Performance |
| Timeline |
| Summit Materials |
| NVIDIA |
Summit Materials and NVIDIA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and NVIDIA
The main advantage of trading using opposite Summit Materials and NVIDIA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, NVIDIA 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 NVIDIA will offset losses from the drop in NVIDIA's long position.| Summit Materials vs. UNIDOC HEALTH P | Summit Materials vs. Media and Games | Summit Materials vs. NIGHTINGALE HEALTH EO | Summit Materials vs. RCI Hospitality Holdings |
| NVIDIA vs. CHINA TONTINE WINES | NVIDIA vs. Eagle Materials | NVIDIA vs. Summit Materials | NVIDIA vs. APPLIED MATERIALS |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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