Correlation Between Summit Materials and Eversource Energy
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Eversource Energy 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 Eversource Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Eversource Energy, you can compare the effects of market volatilities on Summit Materials and Eversource Energy 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 Eversource Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Eversource Energy.
Diversification Opportunities for Summit Materials and Eversource Energy
-0.35 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and Eversource is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Eversource Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eversource Energy 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 Eversource Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eversource Energy has no effect on the direction of Summit Materials i.e., Summit Materials and Eversource Energy go up and down completely randomly.
Pair Corralation between Summit Materials and Eversource Energy
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.42 times more return on investment than Eversource Energy. However, Summit Materials is 1.42 times more volatile than Eversource Energy. It trades about 0.23 of its potential returns per unit of risk. Eversource Energy is currently generating about -0.05 per unit of risk. If you would invest 3,440 in Summit Materials on September 15, 2024 and sell it today you would earn a total of 1,380 from holding Summit Materials or generate 40.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Summit Materials vs. Eversource Energy
Performance |
Timeline |
Summit Materials |
Eversource Energy |
Summit Materials and Eversource Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Materials and Eversource Energy
The main advantage of trading using opposite Summit Materials and Eversource Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Eversource Energy 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 Eversource Energy will offset losses from the drop in Eversource Energy's long position.Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
Eversource Energy vs. NextEra Energy | Eversource Energy vs. PGE Corporation | Eversource Energy vs. Consolidated Edison | Eversource Energy vs. Edison International |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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