Correlation Between GEA GROUP and Summit Materials
Can any of the company-specific risk be diversified away by investing in both GEA GROUP 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 GEA GROUP and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GEA GROUP and Summit Materials, you can compare the effects of market volatilities on GEA GROUP 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 GEA GROUP with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEA GROUP and Summit Materials.
Diversification Opportunities for GEA GROUP and Summit Materials
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between GEA and Summit is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding GEA GROUP and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and GEA GROUP 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 GEA GROUP 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 GEA GROUP i.e., GEA GROUP and Summit Materials go up and down completely randomly.
Pair Corralation between GEA GROUP and Summit Materials
Assuming the 90 days horizon GEA GROUP is expected to generate 3.52 times less return on investment than Summit Materials. But when comparing it to its historical volatility, GEA GROUP is 3.06 times less risky than Summit Materials. It trades about 0.19 of its potential returns per unit of risk. Summit Materials is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,280 in Summit Materials on September 3, 2024 and sell it today you would earn a total of 540.00 from holding Summit Materials or generate 12.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GEA GROUP vs. Summit Materials
Performance |
| Timeline |
| GEA GROUP |
| Summit Materials |
GEA GROUP and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GEA GROUP and Summit Materials
The main advantage of trading using opposite GEA GROUP and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEA GROUP 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.| GEA GROUP vs. Summit Materials | GEA GROUP vs. Vulcan Materials | GEA GROUP vs. Rayonier Advanced Materials | GEA GROUP vs. Dairy Farm International |
| Summit Materials vs. KIMBALL ELECTRONICS | Summit Materials vs. AOI Electronics Co | Summit Materials vs. LION ONE METALS | Summit Materials vs. Perseus Mining Limited |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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