Correlation Between Summit Materials and Broadstone Net

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

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

Diversification Opportunities for Summit Materials and Broadstone Net

-0.81

Correlation Coefficient

Summit Materials  Broadstone Net

Pay attention - limited upside

The 3 months correlation between Summit and Broadstone is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Broadstone Net Lease in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Broadstone Net Lease and Summit Materials 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 Summit Materials are associated (or correlated) with Broadstone Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Broadstone Net Lease has no effect on the direction of Summit Materials i.e., Summit Materials and Broadstone Net go up and down completely randomly.

Pair Corralation between Summit Materials and Broadstone Net

Considering the 90-day investment horizon Summit Materials is expected to generate 0.22 times more return on investment than Broadstone Net. However, Summit Materials is 4.46 times less risky than Broadstone Net. It trades about -0.16 of its potential returns per unit of risk. Broadstone Net Lease is currently generating about -0.38 per unit of risk. If you would invest  5,094  in Summit Materials on September 29, 2024 and sell it today you would lose (38.00) from holding Summit Materials or give up 0.75% of portfolio value over 90 days.

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

Summit Materials  vs.  Broadstone Net Lease

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 weak basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Broadstone Net Lease

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Broadstone Net Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Summit Materials and Broadstone Net

The main advantage of trading using opposite Summit Materials and Broadstone Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Broadstone Net 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 Broadstone Net will offset losses from the drop in Broadstone Net's long position.

The idea behind Summit Materials and Broadstone Net Lease 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.