Correlation Between Summit Materials and GLOBUS MEDICAL

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

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

Diversification Opportunities for Summit Materials and GLOBUS MEDICAL

0.95

Correlation Coefficient

Summit Materials  GLOBUS MEDICAL

Almost no diversification

The 3 months correlation between Summit and GLOBUS is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and GLOBUS MEDICAL A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GLOBUS MEDICAL A 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 GLOBUS MEDICAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GLOBUS MEDICAL A has no effect on the direction of Summit Materials i.e., Summit Materials and GLOBUS MEDICAL go up and down completely randomly.

Pair Corralation between Summit Materials and GLOBUS MEDICAL

Assuming the 90 days trading horizon Summit Materials is expected to generate 1.02 times more return on investment than GLOBUS MEDICAL. However, Summit Materials is 1.02 times more volatile than GLOBUS MEDICAL A. It trades about 0.29 of its potential returns per unit of risk. GLOBUS MEDICAL A is currently generating about 0.16 per unit of risk. If you would invest  3,340  in Summit Materials on October 6, 2024 and sell it today you would earn a total of  1,600  from holding Summit Materials or generate 47.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.36%
Values	Daily Returns

Summit Materials  vs.  GLOBUS MEDICAL A

Summit Materials

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 22 (%) 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.

GLOBUS MEDICAL A

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GLOBUS MEDICAL A are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, GLOBUS MEDICAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Materials and GLOBUS MEDICAL

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

The idea behind Summit Materials and GLOBUS MEDICAL A 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.