Correlation Between Summit Materials and Arrow Electronics
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Arrow Electronics 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 Summit Materials and Arrow Electronics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Arrow Electronics, you can compare the effects of market volatilities on Summit Materials and Arrow Electronics 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 Summit Materials with a short position of Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Arrow Electronics.
Diversification Opportunities for Summit Materials and Arrow Electronics
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Summit and Arrow is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics and Summit Materials 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 Summit Materials are associated (or correlated) with Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Summit Materials i.e., Summit Materials and Arrow Electronics go up and down completely randomly.
Pair Corralation between Summit Materials and Arrow Electronics
Considering the 90-day investment horizon Summit Materials is expected to generate 1.03 times more return on investment than Arrow Electronics. However, Summit Materials is 1.03 times more volatile than Arrow Electronics. It trades about 0.16 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.02 per unit of risk. If you would invest 3,683 in Summit Materials on November 3, 2024 and sell it today you would earn a total of 1,548 from holding Summit Materials or generate 42.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Arrow Electronics
Performance |
| Timeline |
| Summit Materials |
| Arrow Electronics |
Summit Materials and Arrow Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Arrow Electronics
The main advantage of trading using opposite Summit Materials and Arrow Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Arrow Electronics 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 Arrow Electronics will offset losses from the drop in Arrow Electronics' long position.| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime | Summit Materials vs. James Hardie Industries |
| Arrow Electronics vs. Insight Enterprises | Arrow Electronics vs. Synnex | Arrow Electronics vs. Climb Global Solutions | Arrow Electronics vs. ScanSource |
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 CEOs Directory module to screen CEOs from public companies around the world.
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