Correlation Between RETAIL FOOD and Summit Materials
Can any of the company-specific risk be diversified away by investing in both RETAIL FOOD 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 RETAIL FOOD and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between RETAIL FOOD GROUP and Summit Materials, you can compare the effects of market volatilities on RETAIL FOOD 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 RETAIL FOOD with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of RETAIL FOOD and Summit Materials.
Diversification Opportunities for RETAIL FOOD and Summit Materials
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between RETAIL and Summit is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding RETAIL FOOD GROUP and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and RETAIL FOOD 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 RETAIL FOOD 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 RETAIL FOOD i.e., RETAIL FOOD and Summit Materials go up and down completely randomly.
Pair Corralation between RETAIL FOOD and Summit Materials
Assuming the 90 days trading horizon RETAIL FOOD is expected to generate 1.78 times less return on investment than Summit Materials. In addition to that, RETAIL FOOD is 1.06 times more volatile than Summit Materials. It trades about 0.06 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.12 per unit of volatility. If you would invest 3,460 in Summit Materials on September 3, 2024 and sell it today you would earn a total of 1,380 from holding Summit Materials or generate 39.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
RETAIL FOOD GROUP vs. Summit Materials
Performance |
| Timeline |
| RETAIL FOOD GROUP |
| Summit Materials |
RETAIL FOOD and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with RETAIL FOOD and Summit Materials
The main advantage of trading using opposite RETAIL FOOD and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RETAIL FOOD 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.| RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc | RETAIL FOOD vs. Apple Inc |
| 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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