Correlation Between Summit Materials and Funko
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Funko 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 Funko into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Funko Inc, you can compare the effects of market volatilities on Summit Materials and Funko 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 Funko. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Funko.
Diversification Opportunities for Summit Materials and Funko
-0.5 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and Funko is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko Inc 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 Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of Summit Materials i.e., Summit Materials and Funko go up and down completely randomly.
Pair Corralation between Summit Materials and Funko
Considering the 90-day investment horizon Summit Materials is expected to generate 0.55 times more return on investment than Funko. However, Summit Materials is 1.81 times less risky than Funko. It trades about 0.06 of its potential returns per unit of risk. Funko Inc is currently generating about 0.02 per unit of risk. If you would invest 2,888 in Summit Materials on September 19, 2024 and sell it today you would earn a total of 2,149 from holding Summit Materials or generate 74.41% 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. Funko Inc
Performance |
| Timeline |
| Summit Materials |
| Funko Inc |
Summit Materials and Funko Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Funko
The main advantage of trading using opposite Summit Materials and Funko positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Funko 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 Funko will offset losses from the drop in Funko's long position.The idea behind Summit Materials and Funko Inc pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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