Correlation Between Summit Materials and Timken
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Timken 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 Timken into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Timken Company, you can compare the effects of market volatilities on Summit Materials and Timken 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 Timken. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Timken.
Diversification Opportunities for Summit Materials and Timken
-0.53 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Summit and Timken is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Timken Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Timken Company 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 Timken. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Timken Company has no effect on the direction of Summit Materials i.e., Summit Materials and Timken go up and down completely randomly.
Pair Corralation between Summit Materials and Timken
Considering the 90-day investment horizon Summit Materials is expected to generate 1.14 times more return on investment than Timken. However, Summit Materials is 1.14 times more volatile than Timken Company. It trades about 0.06 of its potential returns per unit of risk. Timken Company is currently generating about 0.0 per unit of risk. If you would invest 3,423 in Summit Materials on September 2, 2024 and sell it today you would earn a total of 1,671 from holding Summit Materials or generate 48.82% 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. Timken Company
Performance |
| Timeline |
| Summit Materials |
| Timken Company |
Summit Materials and Timken Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Timken
The main advantage of trading using opposite Summit Materials and Timken positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Timken 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 Timken will offset losses from the drop in Timken's long position.| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. James Hardie Industries | Summit Materials vs. Eagle Materials |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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