Correlation Between Summit Materials and Nemetschek

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

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

Diversification Opportunities for Summit Materials and Nemetschek

0.04

Correlation Coefficient

Summit Materials  Nemetschek

Significant diversification

The 3 months correlation between Summit and Nemetschek is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Nemetschek AG ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nemetschek AG ON 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 Nemetschek. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nemetschek AG ON has no effect on the direction of Summit Materials i.e., Summit Materials and Nemetschek go up and down completely randomly.

Pair Corralation between Summit Materials and Nemetschek

Assuming the 90 days trading horizon Summit Materials is expected to generate 0.33 times more return on investment than Nemetschek. However, Summit Materials is 3.04 times less risky than Nemetschek. It trades about 0.0 of its potential returns per unit of risk. Nemetschek AG ON is currently generating about -0.37 per unit of risk. If you would invest  4,800  in Summit Materials on October 5, 2024 and sell it today you would earn a total of  0.00  from holding Summit Materials or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Summit Materials  vs.  Nemetschek AG ON

Summit Materials

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Summit Materials has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Nemetschek AG ON

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Summit Materials and Nemetschek

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

The idea behind Summit Materials and Nemetschek AG ON 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.