Correlation Between Summit Materials and 17 Education

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Can any of the company-specific risk be diversified away by investing in both Summit Materials and 17 Education 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 17 Education into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and 17 Education Technology, you can compare the effects of market volatilities on Summit Materials and 17 Education 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 17 Education. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and 17 Education.

Diversification Opportunities for Summit Materials and 17 Education

-0.55
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Summit and 17 Education is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and 17 Education Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 17 Education Technology 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 17 Education. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 17 Education Technology has no effect on the direction of Summit Materials i.e., Summit Materials and 17 Education go up and down completely randomly.

Pair Corralation between Summit Materials and 17 Education

Considering the 90-day investment horizon Summit Materials is expected to generate 0.5 times more return on investment than 17 Education. However, Summit Materials is 2.02 times less risky than 17 Education. It trades about 0.11 of its potential returns per unit of risk. 17 Education Technology is currently generating about -0.02 per unit of risk. If you would invest  3,843  in Summit Materials on August 30, 2024 and sell it today you would earn a total of  1,266  from holding Summit Materials or generate 32.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Summit Materials  vs.  17 Education Technology

 Performance 
       Timeline  
Summit Materials 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.
17 Education Technology 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in 17 Education Technology are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, 17 Education may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Summit Materials and 17 Education Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Summit Materials and 17 Education

The main advantage of trading using opposite Summit Materials and 17 Education positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, 17 Education 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 17 Education will offset losses from the drop in 17 Education's long position.
The idea behind Summit Materials and 17 Education Technology pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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