Correlation Between Plastic Omnium and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Plastic Omnium 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 Plastic Omnium and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plastic Omnium and Summit Materials, you can compare the effects of market volatilities on Plastic Omnium 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 Plastic Omnium with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plastic Omnium and Summit Materials.
Diversification Opportunities for Plastic Omnium and Summit Materials
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Plastic and Summit is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Plastic Omnium and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Plastic Omnium 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 Plastic Omnium 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 Plastic Omnium i.e., Plastic Omnium and Summit Materials go up and down completely randomly.
Pair Corralation between Plastic Omnium and Summit Materials
Assuming the 90 days trading horizon Plastic Omnium is expected to under-perform the Summit Materials. But the stock apears to be less risky and, when comparing its historical volatility, Plastic Omnium is 1.05 times less risky than Summit Materials. The stock trades about -0.05 of its potential returns per unit of risk. The Summit Materials is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest 4,380 in Summit Materials on September 1, 2024 and sell it today you would earn a total of 440.00 from holding Summit Materials or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plastic Omnium vs. Summit Materials
Performance |
| Timeline |
| Plastic Omnium |
| Summit Materials |
Plastic Omnium and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plastic Omnium and Summit Materials
The main advantage of trading using opposite Plastic Omnium and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plastic Omnium 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.| Plastic Omnium vs. PENN NATL GAMING | Plastic Omnium vs. Penn National Gaming | Plastic Omnium vs. Canon Marketing Japan | Plastic Omnium vs. GameStop Corp |
| Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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