Correlation Between Park Ohio and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Park Ohio 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 Park Ohio and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Park Ohio Holdings and Summit Materials, you can compare the effects of market volatilities on Park Ohio 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 Park Ohio with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Park Ohio and Summit Materials.
Diversification Opportunities for Park Ohio and Summit Materials
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Park and Summit is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Park Ohio Holdings and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Park Ohio 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 Park Ohio Holdings 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 Park Ohio i.e., Park Ohio and Summit Materials go up and down completely randomly.
Pair Corralation between Park Ohio and Summit Materials
Given the investment horizon of 90 days Park Ohio Holdings is expected to under-perform the Summit Materials. But the stock apears to be less risky and, when comparing its historical volatility, Park Ohio Holdings is 1.02 times less risky than Summit Materials. The stock trades about -0.22 of its potential returns per unit of risk. The Summit Materials is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 4,868 in Summit Materials on September 14, 2024 and sell it today you would earn a total of 214.00 from holding Summit Materials or generate 4.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Park Ohio Holdings vs. Summit Materials
Performance |
| Timeline |
| Park Ohio Holdings |
| Summit Materials |
Park Ohio and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Park Ohio and Summit Materials
The main advantage of trading using opposite Park Ohio and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Park Ohio 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.| Park Ohio vs. Hurco Companies | Park Ohio vs. Enerpac Tool Group | Park Ohio vs. China Yuchai International | Park Ohio vs. Luxfer Holdings PLC |
| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime | Summit Materials vs. James Hardie Industries |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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