Correlation Between Summit Materials and Pool
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Pool 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 Pool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Pool Corporation, you can compare the effects of market volatilities on Summit Materials and Pool 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 Pool. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Pool.
Diversification Opportunities for Summit Materials and Pool
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Summit and Pool is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Pool Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pool 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 Pool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pool has no effect on the direction of Summit Materials i.e., Summit Materials and Pool go up and down completely randomly.
Pair Corralation between Summit Materials and Pool
Considering the 90-day investment horizon Summit Materials is expected to generate 1.05 times more return on investment than Pool. However, Summit Materials is 1.05 times more volatile than Pool Corporation. It trades about 0.07 of its potential returns per unit of risk. Pool Corporation is currently generating about 0.03 per unit of risk. If you would invest 2,876 in Summit Materials on September 12, 2024 and sell it today you would earn a total of 2,214 from holding Summit Materials or generate 76.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Pool Corp.
Performance |
| Timeline |
| Summit Materials |
| Pool |
Summit Materials and Pool Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Pool
The main advantage of trading using opposite Summit Materials and Pool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Pool 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 Pool will offset losses from the drop in Pool'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 |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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