Correlation Between United States and Summit Materials
Can any of the company-specific risk be diversified away by investing in both United States 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 States 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 States Steel and Summit Materials, you can compare the effects of market volatilities on United States 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 States with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and Summit Materials.
Diversification Opportunities for United States and Summit Materials
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between United and Summit is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and United States 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 States Steel 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 States i.e., United States and Summit Materials go up and down completely randomly.
Pair Corralation between United States and Summit Materials
Taking into account the 90-day investment horizon United States is expected to generate 2.43 times less return on investment than Summit Materials. In addition to that, United States is 1.47 times more volatile than Summit Materials. It trades about 0.02 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.07 per unit of volatility. If you would invest 3,654 in Summit Materials on September 4, 2024 and sell it today you would earn a total of 1,420 from holding Summit Materials or generate 38.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
United States Steel vs. Summit Materials
Performance |
| Timeline |
| United States Steel |
| Summit Materials |
United States and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United States and Summit Materials
The main advantage of trading using opposite United States and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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 States vs. Constellium Nv | United States vs. Century Aluminum | United States vs. China Hongqiao Group | United States vs. Kaiser Aluminum |
| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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