Correlation Between Summit Materials and CompoSecure

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

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

Diversification Opportunities for Summit Materials and CompoSecure

0.72

Correlation Coefficient

Summit Materials  CompoSecure

Poor diversification

The 3 months correlation between Summit and CompoSecure is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and CompoSecure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CompoSecure 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 CompoSecure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CompoSecure has no effect on the direction of Summit Materials i.e., Summit Materials and CompoSecure go up and down completely randomly.

Pair Corralation between Summit Materials and CompoSecure

Considering the 90-day investment horizon Summit Materials is expected to generate 59.62 times less return on investment than CompoSecure. But when comparing it to its historical volatility, Summit Materials is 41.34 times less risky than CompoSecure. It trades about 0.06 of its potential returns per unit of risk. CompoSecure is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  68.00  in CompoSecure on October 3, 2024 and sell it today you would earn a total of  397.00  from holding CompoSecure or generate 583.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.09%
Values	Daily Returns

Summit Materials  vs.  CompoSecure

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.

CompoSecure

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CompoSecure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CompoSecure showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Materials and CompoSecure

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

The idea behind Summit Materials and CompoSecure 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.