Correlation Between Investment and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Investment 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 Investment and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Investment and Summit Materials Cl, you can compare the effects of market volatilities on Investment 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 Investment with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investment and Summit Materials.
Diversification Opportunities for Investment and Summit Materials
0.55 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Investment and Summit is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding The Investment and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Investment 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 The Investment 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 Investment i.e., Investment and Summit Materials go up and down completely randomly.
Pair Corralation between Investment and Summit Materials
Assuming the 90 days trading horizon Investment is expected to generate 9.41 times less return on investment than Summit Materials. But when comparing it to its historical volatility, The Investment is 4.63 times less risky than Summit Materials. It trades about 0.08 of its potential returns per unit of risk. Summit Materials Cl is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 3,999 in Summit Materials Cl on August 31, 2024 and sell it today you would earn a total of 1,093 from holding Summit Materials Cl or generate 27.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Investment vs. Summit Materials Cl
Performance |
| Timeline |
| Investment |
| Summit Materials |
Investment and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investment and Summit Materials
The main advantage of trading using opposite Investment and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investment 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.| Investment vs. Associated British Foods | Investment vs. United States Steel | Investment vs. Premier Foods PLC | Investment vs. Axfood AB |
| Summit Materials vs. The Mercantile Investment | Summit Materials vs. National Beverage Corp | Summit Materials vs. Capital Drilling | Summit Materials vs. Bankers Investment Trust |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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