Correlation Between Summit Materials and Consolidated Communications
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Consolidated Communications 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 Consolidated Communications into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Consolidated Communications Holdings, you can compare the effects of market volatilities on Summit Materials and Consolidated Communications 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 Consolidated Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Consolidated Communications.
Diversification Opportunities for Summit Materials and Consolidated Communications
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and Consolidated is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Consolidated Communications Ho in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Communications 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 are associated (or correlated) with Consolidated Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Communications has no effect on the direction of Summit Materials i.e., Summit Materials and Consolidated Communications go up and down completely randomly.
Pair Corralation between Summit Materials and Consolidated Communications
Assuming the 90 days trading horizon Summit Materials is expected to generate 2.16 times less return on investment than Consolidated Communications. But when comparing it to its historical volatility, Summit Materials is 1.26 times less risky than Consolidated Communications. It trades about 0.11 of its potential returns per unit of risk. Consolidated Communications Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 442.00 in Consolidated Communications Holdings on September 25, 2024 and sell it today you would earn a total of 8.00 from holding Consolidated Communications Holdings or generate 1.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Summit Materials vs. Consolidated Communications Ho
Performance |
Timeline |
Summit Materials |
Consolidated Communications |
Summit Materials and Consolidated Communications Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Materials and Consolidated Communications
The main advantage of trading using opposite Summit Materials and Consolidated Communications positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Consolidated Communications 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 Consolidated Communications will offset losses from the drop in Consolidated Communications' long position.Summit Materials vs. ADRIATIC METALS LS 013355 | Summit Materials vs. BW OFFSHORE LTD | Summit Materials vs. Playtech plc | Summit Materials vs. GLG LIFE TECH |
Consolidated Communications vs. CyberArk Software | Consolidated Communications vs. SHIN ETSU CHEMICAL | Consolidated Communications vs. PTT Global Chemical | Consolidated Communications vs. WESTLAKE CHEMICAL |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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