Correlation Between Summit Materials and Young Cos

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

Diversification Opportunities for Summit Materials and Young Cos

0.07

Correlation Coefficient

Summit Materials  Young Cos

Significant diversification

The 3 months correlation between Summit and Young is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Young Cos Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Young Cos Brewery 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 Young Cos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Young Cos Brewery has no effect on the direction of Summit Materials i.e., Summit Materials and Young Cos go up and down completely randomly.

Pair Corralation between Summit Materials and Young Cos

Assuming the 90 days trading horizon Summit Materials Cl is expected to generate 1.1 times more return on investment than Young Cos. However, Summit Materials is 1.1 times more volatile than Young Cos Brewery. It trades about 0.06 of its potential returns per unit of risk. Young Cos Brewery is currently generating about 0.0 per unit of risk. If you would invest  3,266  in Summit Materials Cl on October 25, 2024 and sell it today you would earn a total of  1,955  from holding Summit Materials Cl or generate 59.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.57%
Values	Daily Returns

Summit Materials Cl  vs.  Young Cos Brewery

Summit Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 13 (%) 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.

Young Cos Brewery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Young Cos Brewery has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Young Cos is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Summit Materials and Young Cos

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

The idea behind Summit Materials Cl and Young Cos Brewery 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.