Correlation Between Apple and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Apple and Summit Materials 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 Apple and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Summit Materials, you can compare the effects of market volatilities on Apple and Summit Materials 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 Apple with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Summit Materials.
Diversification Opportunities for Apple and Summit Materials
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Apple and Summit is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Apple 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 Apple Inc are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Apple i.e., Apple and Summit Materials go up and down completely randomly.
Pair Corralation between Apple and Summit Materials
Assuming the 90 days trading horizon Apple is expected to generate 2.16 times less return on investment than Summit Materials. In addition to that, Apple is 2.55 times more volatile than Summit Materials. It trades about 0.03 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.16 per unit of volatility. If you would invest 5,000 in Summit Materials on November 29, 2024 and sell it today you would earn a total of 50.00 from holding Summit Materials or generate 1.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 54.55% |
| Values | Daily Returns |
Apple Inc vs. Summit Materials
Performance |
| Timeline |
| Apple Inc |
| Summit Materials |
Risk-Adjusted Performance
OK
Weak | Strong |
Apple and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Summit Materials
The main advantage of trading using opposite Apple and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| Apple vs. Sinopec Shanghai Petrochemical | Apple vs. ACCSYS TECHPLC EO | Apple vs. AAC TECHNOLOGHLDGADR | Apple vs. PKSHA TECHNOLOGY INC |
| Summit Materials vs. Emperor Entertainment Hotel | Summit Materials vs. Phibro Animal Health | Summit Materials vs. PURETECH HEALTH PLC | Summit Materials vs. MPH Health Care |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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