Correlation Between Summit Materials and INFORMATION SVC
Can any of the company-specific risk be diversified away by investing in both Summit Materials and INFORMATION SVC 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 INFORMATION SVC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and INFORMATION SVC GRP, you can compare the effects of market volatilities on Summit Materials and INFORMATION SVC 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 INFORMATION SVC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and INFORMATION SVC.
Diversification Opportunities for Summit Materials and INFORMATION SVC
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and INFORMATION is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Summit Materials i.e., Summit Materials and INFORMATION SVC go up and down completely randomly.
Pair Corralation between Summit Materials and INFORMATION SVC
Assuming the 90 days trading horizon Summit Materials is expected to generate 1.12 times more return on investment than INFORMATION SVC. However, Summit Materials is 1.12 times more volatile than INFORMATION SVC GRP. It trades about 0.24 of its potential returns per unit of risk. INFORMATION SVC GRP is currently generating about 0.13 per unit of risk. If you would invest 3,440 in Summit Materials on September 24, 2024 and sell it today you would earn a total of 1,400 from holding Summit Materials or generate 40.7% 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. INFORMATION SVC GRP
Performance |
Timeline |
Summit Materials |
INFORMATION SVC GRP |
Summit Materials and INFORMATION SVC Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Materials and INFORMATION SVC
The main advantage of trading using opposite Summit Materials and INFORMATION SVC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, INFORMATION SVC 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 INFORMATION SVC will offset losses from the drop in INFORMATION SVC's long position.Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc | Summit Materials vs. Apple Inc |
INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Apple Inc | INFORMATION SVC vs. Microsoft |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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