Correlation Between Summit Materials and Joint Stock
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Joint Stock 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 Joint Stock into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Joint Stock, you can compare the effects of market volatilities on Summit Materials and Joint Stock 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 Joint Stock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Joint Stock.
Diversification Opportunities for Summit Materials and Joint Stock
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Summit and Joint is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Joint Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Joint Stock 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 Joint Stock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Joint Stock has no effect on the direction of Summit Materials i.e., Summit Materials and Joint Stock go up and down completely randomly.
Pair Corralation between Summit Materials and Joint Stock
Considering the 90-day investment horizon Summit Materials is expected to generate 1.41 times less return on investment than Joint Stock. But when comparing it to its historical volatility, Summit Materials is 1.35 times less risky than Joint Stock. It trades about 0.06 of its potential returns per unit of risk. Joint Stock is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 7,259 in Joint Stock on September 12, 2024 and sell it today you would earn a total of 3,632 from holding Joint Stock or generate 50.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 75.07% |
| Values | Daily Returns |
Summit Materials vs. Joint Stock
Performance |
| Timeline |
| Summit Materials |
| Joint Stock |
Summit Materials and Joint Stock Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Joint Stock
The main advantage of trading using opposite Summit Materials and Joint Stock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Joint Stock 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 Joint Stock will offset losses from the drop in Joint Stock'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 |
| Joint Stock vs. SentinelOne | Joint Stock vs. BlackBerry | Joint Stock vs. Global Blue Group | Joint Stock vs. Aurora Mobile |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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