Correlation Between Summit Materials and CRH PLC

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

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

Diversification Opportunities for Summit Materials and CRH PLC

0.24

Correlation Coefficient

Summit Materials  CRH PLC

Modest diversification

The 3 months correlation between Summit and CRH is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and CRH PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRH PLC ADR 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 CRH PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRH PLC ADR has no effect on the direction of Summit Materials i.e., Summit Materials and CRH PLC go up and down completely randomly.

Pair Corralation between Summit Materials and CRH PLC

Considering the 90-day investment horizon Summit Materials is expected to generate 0.18 times more return on investment than CRH PLC. However, Summit Materials is 5.52 times less risky than CRH PLC. It trades about 0.32 of its potential returns per unit of risk. CRH PLC ADR is currently generating about 0.05 per unit of risk. If you would invest  5,056  in Summit Materials on December 27, 2024 and sell it today you would earn a total of  193.00  from holding Summit Materials or generate 3.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	50.0%
Values	Daily Returns

Summit Materials  vs.  CRH PLC ADR

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.

CRH PLC ADR

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CRH PLC ADR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, CRH PLC may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Summit Materials and CRH PLC

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

The idea behind Summit Materials and CRH PLC ADR 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.