Correlation Between Summit Materials and Biglari Holdings
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Biglari Holdings 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 Biglari Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Biglari Holdings, you can compare the effects of market volatilities on Summit Materials and Biglari Holdings 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 Biglari Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Biglari Holdings.
Diversification Opportunities for Summit Materials and Biglari Holdings
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Biglari is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Biglari Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biglari Holdings 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 Biglari Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biglari Holdings has no effect on the direction of Summit Materials i.e., Summit Materials and Biglari Holdings go up and down completely randomly.
Pair Corralation between Summit Materials and Biglari Holdings
Considering the 90-day investment horizon Summit Materials is expected to generate 1.0 times more return on investment than Biglari Holdings. However, Summit Materials is 1.0 times less risky than Biglari Holdings. It trades about 0.06 of its potential returns per unit of risk. Biglari Holdings is currently generating about 0.05 per unit of risk. If you would invest 3,128 in Summit Materials on September 3, 2024 and sell it today you would earn a total of 1,966 from holding Summit Materials or generate 62.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Biglari Holdings
Performance |
| Timeline |
| Summit Materials |
| Biglari Holdings |
Summit Materials and Biglari Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Biglari Holdings
The main advantage of trading using opposite Summit Materials and Biglari Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Biglari Holdings 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 Biglari Holdings will offset losses from the drop in Biglari Holdings' 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 |
| Biglari Holdings vs. Highway Holdings Limited | Biglari Holdings vs. QCR Holdings | Biglari Holdings vs. Partner Communications | Biglari Holdings vs. Acumen Pharmaceuticals |
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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