Correlation Between Bill and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Bill 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 Bill and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bill Com Holdings and Summit Materials, you can compare the effects of market volatilities on Bill 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 Bill with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bill and Summit Materials.
Diversification Opportunities for Bill and Summit Materials
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bill and Summit is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Bill Com Holdings and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Bill 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 Bill Com Holdings 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 Bill i.e., Bill and Summit Materials go up and down completely randomly.
Pair Corralation between Bill and Summit Materials
Given the investment horizon of 90 days Bill Com Holdings is expected to generate 2.06 times more return on investment than Summit Materials. However, Bill is 2.06 times more volatile than Summit Materials. It trades about 0.45 of its potential returns per unit of risk. Summit Materials is currently generating about 0.14 per unit of risk. If you would invest 5,826 in Bill Com Holdings on September 2, 2024 and sell it today you would earn a total of 3,196 from holding Bill Com Holdings or generate 54.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bill Com Holdings vs. Summit Materials
Performance |
| Timeline |
| Bill Com Holdings |
| Summit Materials |
Bill and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bill and Summit Materials
The main advantage of trading using opposite Bill and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bill 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.The idea behind Bill Com Holdings and Summit Materials pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. James Hardie Industries | Summit Materials vs. Eagle 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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