Correlation Between LENSAR and Summit Materials

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

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

Diversification Opportunities for LENSAR and Summit Materials

0.7

Correlation Coefficient

LENSAR  Summit Materials

Poor diversification

The 3 months correlation between LENSAR and Summit is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding LENSAR Inc and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and LENSAR 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 LENSAR Inc 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 LENSAR i.e., LENSAR and Summit Materials go up and down completely randomly.

Pair Corralation between LENSAR and Summit Materials

Given the investment horizon of 90 days LENSAR Inc is expected to generate 15.14 times more return on investment than Summit Materials. However, LENSAR is 15.14 times more volatile than Summit Materials. It trades about 0.17 of its potential returns per unit of risk. Summit Materials is currently generating about 0.32 per unit of risk. If you would invest  838.00  in LENSAR Inc on December 27, 2024 and sell it today you would earn a total of  576.00  from holding LENSAR Inc or generate 68.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	49.18%
Values	Daily Returns

LENSAR Inc  vs.  Summit Materials

LENSAR Inc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LENSAR Inc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain basic indicators, LENSAR reported solid returns over the last few months and may actually be approaching a breakup point.

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 LENSAR and Summit Materials

The main advantage of trading using opposite LENSAR and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LENSAR 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 LENSAR Inc 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.

Check out your portfolio center.

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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.