Correlation Between Cboe UK and Summit Materials

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

By analyzing existing cross correlation between Cboe UK Consumer and Summit Materials Cl, you can compare the effects of market volatilities on Cboe UK and Summit Materials 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 Cboe UK with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cboe UK and Summit Materials.

Diversification Opportunities for Cboe UK and Summit Materials

0.57

Correlation Coefficient

Cboe UK  Summit Materials

Very weak diversification

The 3 months correlation between Cboe and Summit is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cboe UK Consumer and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Cboe UK 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 Cboe UK Consumer are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of Cboe UK i.e., Cboe UK and Summit Materials go up and down completely randomly.

Pair Corralation between Cboe UK and Summit Materials

Assuming the 90 days trading horizon Cboe UK is expected to generate 22.61 times less return on investment than Summit Materials. In addition to that, Cboe UK is 2.69 times more volatile than Summit Materials Cl. It trades about 0.0 of its total potential returns per unit of risk. Summit Materials Cl is currently generating about 0.19 per unit of volatility. If you would invest  5,085  in Summit Materials Cl on December 1, 2024 and sell it today you would earn a total of  149.00  from holding Summit Materials Cl or generate 2.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	74.19%
Values	Daily Returns

Cboe UK Consumer  vs.  Summit Materials Cl

Pair Trading with Cboe UK and Summit Materials

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

The idea behind Cboe UK Consumer and Summit Materials Cl 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.