Correlation Between Summit Materials and Western Digital
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Western Digital 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 Western Digital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Western Digital, you can compare the effects of market volatilities on Summit Materials and Western Digital 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 Western Digital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Western Digital.
Diversification Opportunities for Summit Materials and Western Digital
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Summit and Western is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Western Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Digital 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 Western Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Digital has no effect on the direction of Summit Materials i.e., Summit Materials and Western Digital go up and down completely randomly.
Pair Corralation between Summit Materials and Western Digital
Considering the 90-day investment horizon Summit Materials is expected to generate 0.81 times more return on investment than Western Digital. However, Summit Materials is 1.23 times less risky than Western Digital. It trades about 0.16 of its potential returns per unit of risk. Western Digital is currently generating about 0.06 per unit of risk. If you would invest 3,683 in Summit Materials on November 3, 2024 and sell it today you would earn a total of 1,548 from holding Summit Materials or generate 42.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Western Digital
Performance |
| Timeline |
| Summit Materials |
| Western Digital |
Summit Materials and Western Digital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Western Digital
The main advantage of trading using opposite Summit Materials and Western Digital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Western Digital 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 Western Digital will offset losses from the drop in Western Digital'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 |
| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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