Correlation Between Melar Acquisition and Summit Materials

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

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

Diversification Opportunities for Melar Acquisition and Summit Materials

0.69

Correlation Coefficient

Melar Acquisition  Summit Materials

Poor diversification

The 3 months correlation between Melar and Summit is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Melar Acquisition Corp and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Melar Acquisition 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 Melar Acquisition 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 Melar Acquisition i.e., Melar Acquisition and Summit Materials go up and down completely randomly.

Pair Corralation between Melar Acquisition and Summit Materials

Given the investment horizon of 90 days Melar Acquisition Corp is expected to generate 0.72 times more return on investment than Summit Materials. However, Melar Acquisition Corp is 1.38 times less risky than Summit Materials. It trades about 0.01 of its potential returns per unit of risk. Summit Materials is currently generating about -0.12 per unit of risk. If you would invest  1,005  in Melar Acquisition Corp on September 22, 2024 and sell it today you would earn a total of  1.00  from holding Melar Acquisition Corp or generate 0.1% return on investment over 90 days.

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

Melar Acquisition Corp  vs.  Summit Materials

Melar Acquisition Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Melar Acquisition Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Melar Acquisition is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Summit Materials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 17 (%) 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 Melar Acquisition and Summit Materials

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