Correlation Between Summit Materials and Lake Resources
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Lake Resources 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 Lake Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Lake Resources NL, you can compare the effects of market volatilities on Summit Materials and Lake Resources 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 Lake Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Lake Resources.
Diversification Opportunities for Summit Materials and Lake Resources
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and Lake is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Lake Resources NL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Resources NL 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 Lake Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Resources NL has no effect on the direction of Summit Materials i.e., Summit Materials and Lake Resources go up and down completely randomly.
Pair Corralation between Summit Materials and Lake Resources
Considering the 90-day investment horizon Summit Materials is expected to generate 0.17 times more return on investment than Lake Resources. However, Summit Materials is 5.82 times less risky than Lake Resources. It trades about 0.23 of its potential returns per unit of risk. Lake Resources NL is currently generating about 0.04 per unit of risk. If you would invest 3,565 in Summit Materials on January 7, 2025 and sell it today you would earn a total of 1,684 from holding Summit Materials or generate 47.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 73.29% |
| Values | Daily Returns |
Summit Materials vs. Lake Resources NL
Performance |
| Timeline |
| Summit Materials |
Risk-Adjusted Performance
Solid
Weak | Strong |
| Lake Resources NL |
Summit Materials and Lake Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Lake Resources
The main advantage of trading using opposite Summit Materials and Lake Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Lake Resources 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 Lake Resources will offset losses from the drop in Lake Resources' 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 |
| Lake Resources vs. ioneer Ltd American | Lake Resources vs. Aduro Clean Technologies | Lake Resources vs. Insteel Industries | Lake Resources vs. CleanTech Lithium Plc |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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