Correlation Between Summit Materials and Berkeley
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Berkeley 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 Berkeley into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and The Berkeley Group, you can compare the effects of market volatilities on Summit Materials and Berkeley 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 Berkeley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Berkeley.
Diversification Opportunities for Summit Materials and Berkeley
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and Berkeley is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and The Berkeley Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Berkeley Group 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 Berkeley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Berkeley Group has no effect on the direction of Summit Materials i.e., Summit Materials and Berkeley go up and down completely randomly.
Pair Corralation between Summit Materials and Berkeley
Considering the 90-day investment horizon Summit Materials is expected to generate 1.36 times less return on investment than Berkeley. In addition to that, Summit Materials is 1.13 times more volatile than The Berkeley Group. It trades about 0.06 of its total potential returns per unit of risk. The Berkeley Group is currently generating about 0.09 per unit of volatility. If you would invest 4,899 in The Berkeley Group on September 12, 2024 and sell it today you would earn a total of 1,215 from holding The Berkeley Group or generate 24.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 42.6% |
| Values | Daily Returns |
Summit Materials vs. The Berkeley Group
Performance |
| Timeline |
| Summit Materials |
| Berkeley Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Summit Materials and Berkeley Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Berkeley
The main advantage of trading using opposite Summit Materials and Berkeley positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Berkeley 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 Berkeley will offset losses from the drop in Berkeley's 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 |
| Berkeley vs. Summit Materials | Berkeley vs. Bright Scholar Education | Berkeley vs. Ihuman Inc | Berkeley vs. Getty Copper |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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