Correlation Between Dixons Carphone and Summit Materials

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

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

Diversification Opportunities for Dixons Carphone and Summit Materials

-0.05

Correlation Coefficient

Dixons Carphone  Summit Materials

Good diversification

The 3 months correlation between Dixons and Summit is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dixons Carphone plc and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Dixons Carphone 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 Dixons Carphone plc 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 Dixons Carphone i.e., Dixons Carphone and Summit Materials go up and down completely randomly.

Pair Corralation between Dixons Carphone and Summit Materials

Assuming the 90 days horizon Dixons Carphone is expected to generate 7.23 times less return on investment than Summit Materials. In addition to that, Dixons Carphone is 1.46 times more volatile than Summit Materials. It trades about 0.02 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.17 per unit of volatility. If you would invest  4,510  in Summit Materials on October 25, 2024 and sell it today you would earn a total of  709.00  from holding Summit Materials or generate 15.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Dixons Carphone plc  vs.  Summit Materials

Dixons Carphone plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dixons Carphone is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Summit Materials

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dixons Carphone and Summit Materials

The main advantage of trading using opposite Dixons Carphone and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dixons Carphone 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 Dixons Carphone plc and Summit Materials 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.