Correlation Between Summit Materials and XLMedia PLC

Can any of the company-specific risk be diversified away by investing in both Summit Materials and XLMedia PLC 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 XLMedia PLC 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 XLMedia PLC, you can compare the effects of market volatilities on Summit Materials and XLMedia PLC 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 XLMedia PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and XLMedia PLC.

Diversification Opportunities for Summit Materials and XLMedia PLC

0.47

Correlation Coefficient

Summit Materials  XLMedia PLC

Very weak diversification

The 3 months correlation between Summit and XLMedia is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and XLMedia PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XLMedia PLC 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 XLMedia PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XLMedia PLC has no effect on the direction of Summit Materials i.e., Summit Materials and XLMedia PLC go up and down completely randomly.

Pair Corralation between Summit Materials and XLMedia PLC

Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 0.38 times more return on investment than XLMedia PLC. However, Summit Materials Cl is 2.61 times less risky than XLMedia PLC. It trades about 0.06 of its potential returns per unit of risk. XLMedia PLC is currently generating about 0.0 per unit of risk. If you would invest  3,072  in Summit Materials Cl on September 29, 2024 and sell it today you would earn a total of  1,990  from holding Summit Materials Cl or generate 64.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.18%
Values	Daily Returns

Summit Materials Cl  vs.  XLMedia PLC

Summit Materials

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 15 (%) 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.

XLMedia PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days XLMedia PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, XLMedia PLC is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Summit Materials and XLMedia PLC

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

The idea behind Summit Materials Cl and XLMedia PLC 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.