Correlation Between AG Mortgage and Summit Materials

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

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

Diversification Opportunities for AG Mortgage and Summit Materials

0.63

Correlation Coefficient

AG Mortgage  Summit Materials

Poor diversification

The 3 months correlation between MITP and Summit is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AG Mortgage Investment and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and AG Mortgage 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 AG Mortgage Investment 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 AG Mortgage i.e., AG Mortgage and Summit Materials go up and down completely randomly.

Pair Corralation between AG Mortgage and Summit Materials

Given the investment horizon of 90 days AG Mortgage is expected to generate 2.86 times less return on investment than Summit Materials. But when comparing it to its historical volatility, AG Mortgage Investment is 6.82 times less risky than Summit Materials. It trades about 0.15 of its potential returns per unit of risk. Summit Materials is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  3,143  in Summit Materials on October 11, 2024 and sell it today you would earn a total of  2,061  from holding Summit Materials or generate 65.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	32.66%
Values	Daily Returns

AG Mortgage Investment  vs.  Summit Materials

AG Mortgage Investment

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, AG Mortgage is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Summit Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 21 (%) 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 AG Mortgage and Summit Materials

The main advantage of trading using opposite AG Mortgage and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AG Mortgage 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 AG Mortgage Investment 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.