Correlation Between Hong Kong and Summit Materials

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

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

Diversification Opportunities for Hong Kong and Summit Materials

0.0

Correlation Coefficient

Hong Kong  Summit Materials

Pay attention - limited upside

The 3 months correlation between Hong and Summit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Summit Materials Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Hong Kong 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 Hong Kong Land 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 Hong Kong i.e., Hong Kong and Summit Materials go up and down completely randomly.

Pair Corralation between Hong Kong and Summit Materials

Assuming the 90 days trading horizon Hong Kong is expected to generate 13.07 times less return on investment than Summit Materials. But when comparing it to its historical volatility, Hong Kong Land is 14.39 times less risky than Summit Materials. It trades about 0.08 of its potential returns per unit of risk. Summit Materials Cl is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3,619  in Summit Materials Cl on October 7, 2024 and sell it today you would earn a total of  1,485  from holding Summit Materials Cl or generate 41.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.21%
Values	Daily Returns

Hong Kong Land  vs.  Summit Materials Cl

Hong Kong Land

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hong Kong Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hong Kong is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Summit Materials

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hong Kong and Summit Materials

The main advantage of trading using opposite Hong Kong and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong 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 Hong Kong Land 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.