Correlation Between Summit Materials and Nature Wood
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Nature Wood 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 Nature Wood into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Nature Wood Group, you can compare the effects of market volatilities on Summit Materials and Nature Wood 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 Nature Wood. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Nature Wood.
Diversification Opportunities for Summit Materials and Nature Wood
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and Nature is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Nature Wood Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nature Wood Group 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 Nature Wood. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nature Wood Group has no effect on the direction of Summit Materials i.e., Summit Materials and Nature Wood go up and down completely randomly.
Pair Corralation between Summit Materials and Nature Wood
Considering the 90-day investment horizon Summit Materials is expected to generate 0.65 times more return on investment than Nature Wood. However, Summit Materials is 1.53 times less risky than Nature Wood. It trades about 0.16 of its potential returns per unit of risk. Nature Wood Group is currently generating about -0.03 per unit of risk. If you would invest 4,741 in Summit Materials on September 1, 2024 and sell it today you would earn a total of 353.00 from holding Summit Materials or generate 7.45% 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. Nature Wood Group
Performance |
| Timeline |
| Summit Materials |
| Nature Wood Group |
Summit Materials and Nature Wood Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Nature Wood
The main advantage of trading using opposite Summit Materials and Nature Wood positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Nature Wood 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 Nature Wood will offset losses from the drop in Nature Wood'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 |
| Nature Wood vs. NETGEAR | Nature Wood vs. Chester Mining | Nature Wood vs. Highway Holdings Limited | Nature Wood vs. Inflection Point Acquisition |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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