Correlation Between Summit Materials and Markel Corp

Can any of the company-specific risk be diversified away by investing in both Summit Materials and Markel Corp 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 Markel Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials Cl and Markel Corp, you can compare the effects of market volatilities on Summit Materials and Markel Corp 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 Markel Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Markel Corp.

Diversification Opportunities for Summit Materials and Markel Corp

0.82

Correlation Coefficient

Summit Materials  Markel Corp

Very poor diversification

The 3 months correlation between Summit and Markel is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Markel Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Markel Corp 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 Cl are associated (or correlated) with Markel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Markel Corp has no effect on the direction of Summit Materials i.e., Summit Materials and Markel Corp go up and down completely randomly.

Pair Corralation between Summit Materials and Markel Corp

Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 0.53 times more return on investment than Markel Corp. However, Summit Materials Cl is 1.89 times less risky than Markel Corp. It trades about 0.26 of its potential returns per unit of risk. Markel Corp is currently generating about -0.1 per unit of risk. If you would invest  5,083  in Summit Materials Cl on October 10, 2024 and sell it today you would earn a total of  119.00  from holding Summit Materials Cl or generate 2.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.0%
Values	Daily Returns

Summit Materials Cl  vs.  Markel Corp

Summit Materials

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Markel Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Markel Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Markel Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Summit Materials and Markel Corp

The main advantage of trading using opposite Summit Materials and Markel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Markel Corp 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 Markel Corp will offset losses from the drop in Markel Corp's long position.

The idea behind Summit Materials Cl and Markel Corp 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.

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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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.