Correlation Between Summit Materials and Warehouses
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Warehouses 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 Warehouses into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Warehouses De Pauw, you can compare the effects of market volatilities on Summit Materials and Warehouses 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 Warehouses. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Warehouses.
Diversification Opportunities for Summit Materials and Warehouses
-0.94 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Summit and Warehouses is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Warehouses De Pauw in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warehouses De Pauw 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 Warehouses. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warehouses De Pauw has no effect on the direction of Summit Materials i.e., Summit Materials and Warehouses go up and down completely randomly.
Pair Corralation between Summit Materials and Warehouses
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.48 times more return on investment than Warehouses. However, Summit Materials is 1.48 times more volatile than Warehouses De Pauw. It trades about 0.06 of its potential returns per unit of risk. Warehouses De Pauw is currently generating about -0.02 per unit of risk. If you would invest 2,680 in Summit Materials on September 13, 2024 and sell it today you would earn a total of 2,160 from holding Summit Materials or generate 80.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Warehouses De Pauw
Performance |
| Timeline |
| Summit Materials |
| Warehouses De Pauw |
Summit Materials and Warehouses Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Warehouses
The main advantage of trading using opposite Summit Materials and Warehouses positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Warehouses 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 Warehouses will offset losses from the drop in Warehouses' long position.| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
| Warehouses vs. INTERSHOP Communications Aktiengesellschaft | Warehouses vs. Gaztransport Technigaz SA | Warehouses vs. Consolidated Communications Holdings | Warehouses vs. Air Transport Services |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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