Correlation Between Fidus Investment and Summit Materials

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

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

Diversification Opportunities for Fidus Investment and Summit Materials

0.78

Correlation Coefficient

Fidus Investment  Summit Materials

Poor diversification

The 3 months correlation between Fidus and Summit is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fidus Investment Corp and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Fidus Investment 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 Fidus Investment Corp 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 Fidus Investment i.e., Fidus Investment and Summit Materials go up and down completely randomly.

Pair Corralation between Fidus Investment and Summit Materials

Given the investment horizon of 90 days Fidus Investment is expected to generate 3.37 times less return on investment than Summit Materials. But when comparing it to its historical volatility, Fidus Investment Corp is 2.88 times less risky than Summit Materials. It trades about 0.21 of its potential returns per unit of risk. Summit Materials is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  3,754  in Summit Materials on September 12, 2024 and sell it today you would earn a total of  1,339  from holding Summit Materials or generate 35.67% return on investment over 90 days.

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

Fidus Investment Corp  vs.  Summit Materials

Fidus Investment Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fidus Investment Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Fidus Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Summit Materials

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 19 (%) 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 Fidus Investment and Summit Materials

The main advantage of trading using opposite Fidus Investment and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidus Investment 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 Fidus Investment Corp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.