Correlation Between GEN Restaurant and Summit Materials

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

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

Diversification Opportunities for GEN Restaurant and Summit Materials

-0.75

Correlation Coefficient

GEN Restaurant  Summit Materials

Pay attention - limited upside

The 3 months correlation between GEN and Summit is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding GEN Restaurant Group, and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and GEN Restaurant 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 GEN Restaurant Group, 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 GEN Restaurant i.e., GEN Restaurant and Summit Materials go up and down completely randomly.

Pair Corralation between GEN Restaurant and Summit Materials

Given the investment horizon of 90 days GEN Restaurant Group, is expected to under-perform the Summit Materials. In addition to that, GEN Restaurant is 11.27 times more volatile than Summit Materials. It trades about -0.06 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.23 per unit of volatility. If you would invest  5,077  in Summit Materials on December 17, 2024 and sell it today you would earn a total of  172.00  from holding Summit Materials or generate 3.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	60.66%
Values	Daily Returns

GEN Restaurant Group,  vs.  Summit Materials

GEN Restaurant Group,

Risk-Adjusted Performance

Very Weak

Over the last 90 days GEN Restaurant Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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 healthy basic indicators, Summit Materials is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with GEN Restaurant and Summit Materials

The main advantage of trading using opposite GEN Restaurant and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEN Restaurant 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 GEN Restaurant Group, 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.