Correlation Between Neo Concept and Summit Materials

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

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

Diversification Opportunities for Neo Concept and Summit Materials

-0.42

Correlation Coefficient

Neo Concept  Summit Materials

Very good diversification

The 3 months correlation between Neo and Summit is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Neo Concept International Grou and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Neo Concept 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 Neo Concept International 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 Neo Concept i.e., Neo Concept and Summit Materials go up and down completely randomly.

Pair Corralation between Neo Concept and Summit Materials

Considering the 90-day investment horizon Neo Concept International Group is expected to under-perform the Summit Materials. In addition to that, Neo Concept is 15.42 times more volatile than Summit Materials. It trades about -0.03 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.29 per unit of volatility. If you would invest  5,059  in Summit Materials on December 23, 2024 and sell it today you would earn a total of  190.00  from holding Summit Materials or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	54.1%
Values	Daily Returns

Neo Concept International Grou  vs.  Summit Materials

Neo Concept Internat

Risk-Adjusted Performance

Very Weak

Over the last 90 days Neo Concept International Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 Neo Concept and Summit Materials

The main advantage of trading using opposite Neo Concept and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Neo Concept 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 Neo Concept International 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.