Correlation Between Benchmark Electronics and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Benchmark Electronics 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 Benchmark Electronics and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Benchmark Electronics and Summit Materials, you can compare the effects of market volatilities on Benchmark Electronics 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 Benchmark Electronics with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Benchmark Electronics and Summit Materials.
Diversification Opportunities for Benchmark Electronics and Summit Materials
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Benchmark and Summit is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Benchmark Electronics 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 Benchmark Electronics 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 Benchmark Electronics i.e., Benchmark Electronics and Summit Materials go up and down completely randomly.
Pair Corralation between Benchmark Electronics and Summit Materials
Assuming the 90 days horizon Benchmark Electronics is expected to generate 3.38 times less return on investment than Summit Materials. In addition to that, Benchmark Electronics is 1.1 times more volatile than Summit Materials. It trades about 0.04 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.15 per unit of volatility. If you would invest 3,480 in Summit Materials on November 7, 2024 and sell it today you would earn a total of 1,520 from holding Summit Materials or generate 43.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Benchmark Electronics vs. Summit Materials
Performance |
| Timeline |
| Benchmark Electronics |
| Summit Materials |
Benchmark Electronics and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Benchmark Electronics and Summit Materials
The main advantage of trading using opposite Benchmark Electronics and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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.| Benchmark Electronics vs. Canadian Utilities Limited | Benchmark Electronics vs. Air Lease | Benchmark Electronics vs. UNITED UTILITIES GR | Benchmark Electronics vs. GEELY AUTOMOBILE |
| Summit Materials vs. Pentair plc | Summit Materials vs. CarsalesCom | Summit Materials vs. Commercial Vehicle Group | Summit Materials vs. Air New Zealand |
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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