Correlation Between Summit Materials and SBC Communications
Can any of the company-specific risk be diversified away by investing in both Summit Materials and SBC Communications 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 SBC Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and SBC Communications, you can compare the effects of market volatilities on Summit Materials and SBC Communications 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 SBC Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and SBC Communications.
Diversification Opportunities for Summit Materials and SBC Communications
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Summit and SBC is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and SBC Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SBC Communications 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 SBC Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SBC Communications has no effect on the direction of Summit Materials i.e., Summit Materials and SBC Communications go up and down completely randomly.
Pair Corralation between Summit Materials and SBC Communications
Considering the 90-day investment horizon Summit Materials is expected to generate 0.39 times more return on investment than SBC Communications. However, Summit Materials is 2.54 times less risky than SBC Communications. It trades about 0.06 of its potential returns per unit of risk. SBC Communications is currently generating about -0.01 per unit of risk. If you would invest 3,322 in Summit Materials on October 25, 2024 and sell it today you would earn a total of 1,897 from holding Summit Materials or generate 57.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 74.04% |
| Values | Daily Returns |
Summit Materials vs. SBC Communications
Performance |
| Timeline |
| Summit Materials |
| SBC Communications |
Summit Materials and SBC Communications Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and SBC Communications
The main advantage of trading using opposite Summit Materials and SBC Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, SBC Communications 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 SBC Communications will offset losses from the drop in SBC Communications' 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 |
| SBC Communications vs. Valneva SE ADR | SBC Communications vs. Arrow Electronics | SBC Communications vs. Sellas Life Sciences | SBC Communications vs. Spyre Therapeutics |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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