Correlation Between Summit Materials and CARSALES
Can any of the company-specific risk be diversified away by investing in both Summit Materials and CARSALES 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 CARSALES into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and CARSALESCOM, you can compare the effects of market volatilities on Summit Materials and CARSALES 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 CARSALES. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and CARSALES.
Diversification Opportunities for Summit Materials and CARSALES
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and CARSALES is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Summit Materials i.e., Summit Materials and CARSALES go up and down completely randomly.
Pair Corralation between Summit Materials and CARSALES
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.17 times less return on investment than CARSALES. In addition to that, Summit Materials is 1.38 times more volatile than CARSALESCOM. It trades about 0.06 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.1 per unit of volatility. If you would invest 1,292 in CARSALESCOM on September 3, 2024 and sell it today you would earn a total of 1,268 from holding CARSALESCOM or generate 98.14% 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. CARSALESCOM
Performance |
| Timeline |
| Summit Materials |
| CARSALESCOM |
Summit Materials and CARSALES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and CARSALES
The main advantage of trading using opposite Summit Materials and CARSALES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, CARSALES 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 CARSALES will offset losses from the drop in CARSALES's long position.| Summit Materials vs. KIMBALL ELECTRONICS | Summit Materials vs. AOI Electronics Co | Summit Materials vs. LION ONE METALS | Summit Materials vs. Perseus Mining Limited |
| CARSALES vs. COMBA TELECOM SYST | CARSALES vs. SENECA FOODS A | CARSALES vs. Entravision Communications | CARSALES vs. JJ SNACK FOODS |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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