Correlation Between UNITED UTILITIES and Summit Materials
Can any of the company-specific risk be diversified away by investing in both UNITED UTILITIES and Summit Materials 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 UNITED UTILITIES and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between UNITED UTILITIES GR and Summit Materials, you can compare the effects of market volatilities on UNITED UTILITIES and Summit Materials 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 UNITED UTILITIES with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of UNITED UTILITIES and Summit Materials.
Diversification Opportunities for UNITED UTILITIES and Summit Materials
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between UNITED and Summit is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding UNITED UTILITIES GR and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and UNITED UTILITIES 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 UNITED UTILITIES GR are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of UNITED UTILITIES i.e., UNITED UTILITIES and Summit Materials go up and down completely randomly.
Pair Corralation between UNITED UTILITIES and Summit Materials
Assuming the 90 days trading horizon UNITED UTILITIES is expected to generate 3.53 times less return on investment than Summit Materials. But when comparing it to its historical volatility, UNITED UTILITIES GR is 1.47 times less risky than Summit Materials. It trades about 0.03 of its potential returns per unit of risk. Summit Materials is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 3,360 in Summit Materials on September 3, 2024 and sell it today you would earn a total of 1,480 from holding Summit Materials or generate 44.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
UNITED UTILITIES GR vs. Summit Materials
Performance |
| Timeline |
| UNITED UTILITIES |
| Summit Materials |
UNITED UTILITIES and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with UNITED UTILITIES and Summit Materials
The main advantage of trading using opposite UNITED UTILITIES and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if UNITED UTILITIES position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.| UNITED UTILITIES vs. ANTA SPORTS PRODUCT | UNITED UTILITIES vs. Transport International Holdings | UNITED UTILITIES vs. Sqs Software Quality | UNITED UTILITIES vs. PSI Software AG |
| Summit Materials vs. KIMBALL ELECTRONICS | Summit Materials vs. AOI Electronics Co | Summit Materials vs. LION ONE METALS | Summit Materials vs. Perseus Mining Limited |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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