Correlation Between Summit Materials and Natural Alternatives
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Natural Alternatives 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 Natural Alternatives into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Natural Alternatives International, you can compare the effects of market volatilities on Summit Materials and Natural Alternatives 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 Natural Alternatives. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Natural Alternatives.
Diversification Opportunities for Summit Materials and Natural Alternatives
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Summit and Natural is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Natural Alternatives Internati in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Alternatives 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 Natural Alternatives. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Alternatives has no effect on the direction of Summit Materials i.e., Summit Materials and Natural Alternatives go up and down completely randomly.
Pair Corralation between Summit Materials and Natural Alternatives
Considering the 90-day investment horizon Summit Materials is expected to generate 0.66 times more return on investment than Natural Alternatives. However, Summit Materials is 1.52 times less risky than Natural Alternatives. It trades about 0.06 of its potential returns per unit of risk. Natural Alternatives International is currently generating about -0.02 per unit of risk. If you would invest 2,975 in Summit Materials on August 29, 2024 and sell it today you would earn a total of 2,134 from holding Summit Materials or generate 71.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Natural Alternatives Internati
Performance |
| Timeline |
| Summit Materials |
| Natural Alternatives |
Summit Materials and Natural Alternatives Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Natural Alternatives
The main advantage of trading using opposite Summit Materials and Natural Alternatives positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Natural Alternatives 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 Natural Alternatives will offset losses from the drop in Natural Alternatives' 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 |
| Natural Alternatives vs. Kellanova | Natural Alternatives vs. Lamb Weston Holdings | Natural Alternatives vs. Borealis Foods | Natural Alternatives vs. Central Garden Pet |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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