Correlation Between Summa Silver and Richelieu Hardware

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Can any of the company-specific risk be diversified away by investing in both Summa Silver and Richelieu Hardware 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 Summa Silver and Richelieu Hardware into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summa Silver Corp and Richelieu Hardware, you can compare the effects of market volatilities on Summa Silver and Richelieu Hardware 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 Summa Silver with a short position of Richelieu Hardware. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summa Silver and Richelieu Hardware.

Diversification Opportunities for Summa Silver and Richelieu Hardware

SummaRichelieuDiversified AwaySummaRichelieuDiversified Away100%
0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between Summa and Richelieu is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Summa Silver Corp and Richelieu Hardware in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richelieu Hardware and Summa Silver 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 Summa Silver Corp are associated (or correlated) with Richelieu Hardware. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richelieu Hardware has no effect on the direction of Summa Silver i.e., Summa Silver and Richelieu Hardware go up and down completely randomly.

Pair Corralation between Summa Silver and Richelieu Hardware

Assuming the 90 days trading horizon Summa Silver Corp is expected to generate 3.18 times more return on investment than Richelieu Hardware. However, Summa Silver is 3.18 times more volatile than Richelieu Hardware. It trades about 0.09 of its potential returns per unit of risk. Richelieu Hardware is currently generating about -0.56 per unit of risk. If you would invest  34.00  in Summa Silver Corp on November 27, 2024 and sell it today you would earn a total of  2.00  from holding Summa Silver Corp or generate 5.88% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Summa Silver Corp  vs.  Richelieu Hardware

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb 0102030
JavaScript chart by amCharts 3.21.15SSVR RCH
       Timeline  
Summa Silver Corp 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Summa Silver Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Summa Silver showed solid returns over the last few months and may actually be approaching a breakup point.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb0.260.280.30.320.340.360.38
Richelieu Hardware 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Richelieu Hardware has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb3637383940414243

Summa Silver and Richelieu Hardware Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-14.63-10.96-7.28-3.61-0.06123.747.6111.4815.3519.21 0.050.100.15
JavaScript chart by amCharts 3.21.15SSVR RCH
       Returns  

Pair Trading with Summa Silver and Richelieu Hardware

The main advantage of trading using opposite Summa Silver and Richelieu Hardware positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summa Silver position performs unexpectedly, Richelieu Hardware 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 Richelieu Hardware will offset losses from the drop in Richelieu Hardware's long position.
The idea behind Summa Silver Corp and Richelieu Hardware 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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