Correlation Between Freedom Holding and Summit Materials

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

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

Diversification Opportunities for Freedom Holding and Summit Materials

-0.57

Correlation Coefficient

Freedom Holding  Summit Materials

Excellent diversification

The 3 months correlation between Freedom and Summit is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Holding Corp and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Freedom Holding 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 Freedom Holding 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 Freedom Holding i.e., Freedom Holding and Summit Materials go up and down completely randomly.

Pair Corralation between Freedom Holding and Summit Materials

Given the investment horizon of 90 days Freedom Holding Corp is expected to generate 6.68 times more return on investment than Summit Materials. However, Freedom Holding is 6.68 times more volatile than Summit Materials. It trades about 0.06 of its potential returns per unit of risk. Summit Materials is currently generating about 0.3 per unit of risk. If you would invest  12,717  in Freedom Holding Corp on December 20, 2024 and sell it today you would earn a total of  953.00  from holding Freedom Holding Corp or generate 7.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	56.67%
Values	Daily Returns

Freedom Holding Corp  vs.  Summit Materials

Freedom Holding Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Summit Materials

Risk-Adjusted Performance

Solid

Over the last 90 days Summit Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Freedom Holding and Summit Materials

The main advantage of trading using opposite Freedom Holding and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Holding 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 Freedom Holding 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.