Correlation Between Summit Materials and United Rentals
Can any of the company-specific risk be diversified away by investing in both Summit Materials and United Rentals 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 United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and United Rentals, you can compare the effects of market volatilities on Summit Materials and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and United Rentals.
Diversification Opportunities for Summit Materials and United Rentals
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and United is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of Summit Materials i.e., Summit Materials and United Rentals go up and down completely randomly.
Pair Corralation between Summit Materials and United Rentals
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.02 times more return on investment than United Rentals. However, Summit Materials is 1.02 times more volatile than United Rentals. It trades about 0.12 of its potential returns per unit of risk. United Rentals is currently generating about -0.17 per unit of risk. If you would invest 4,640 in Summit Materials on September 13, 2024 and sell it today you would earn a total of 200.00 from holding Summit Materials or generate 4.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Summit Materials vs. United Rentals
Performance |
| Timeline |
| Summit Materials |
| United Rentals |
Summit Materials and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and United Rentals
The main advantage of trading using opposite Summit Materials and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
| United Rentals vs. WillScot Mobile Mini | United Rentals vs. Superior Plus Corp | United Rentals vs. SIVERS SEMICONDUCTORS AB | United Rentals vs. Norsk Hydro ASA |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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