Correlation Between Summit Materials and New Oriental
Can any of the company-specific risk be diversified away by investing in both Summit Materials and New Oriental 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 New Oriental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and New Oriental Education, you can compare the effects of market volatilities on Summit Materials and New Oriental 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 New Oriental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and New Oriental.
Diversification Opportunities for Summit Materials and New Oriental
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Summit and New is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and New Oriental Education in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New Oriental Education 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 New Oriental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New Oriental Education has no effect on the direction of Summit Materials i.e., Summit Materials and New Oriental go up and down completely randomly.
Pair Corralation between Summit Materials and New Oriental
Considering the 90-day investment horizon Summit Materials is expected to generate 0.23 times more return on investment than New Oriental. However, Summit Materials is 4.33 times less risky than New Oriental. It trades about 0.38 of its potential returns per unit of risk. New Oriental Education is currently generating about 0.04 per unit of risk. If you would invest 5,035 in Summit Materials on October 20, 2024 and sell it today you would earn a total of 184.00 from holding Summit Materials or generate 3.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. New Oriental Education
Performance |
| Timeline |
| Summit Materials |
| New Oriental Education |
Summit Materials and New Oriental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and New Oriental
The main advantage of trading using opposite Summit Materials and New Oriental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, New Oriental 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 New Oriental will offset losses from the drop in New Oriental'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 |
| New Oriental vs. Gaotu Techedu DRC | New Oriental vs. 17 Education Technology | New Oriental vs. Chegg Inc | New Oriental vs. Elite Education Group |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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