Correlation Between Summit Materials and Enlight Renewable

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

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

Diversification Opportunities for Summit Materials and Enlight Renewable

0.18

Correlation Coefficient

Summit Materials  Enlight Renewable

Average diversification

The 3 months correlation between Summit and Enlight is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Enlight Renewable Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enlight Renewable Energy 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 Enlight Renewable. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enlight Renewable Energy has no effect on the direction of Summit Materials i.e., Summit Materials and Enlight Renewable go up and down completely randomly.

Pair Corralation between Summit Materials and Enlight Renewable

Considering the 90-day investment horizon Summit Materials is expected to generate 21.76 times less return on investment than Enlight Renewable. But when comparing it to its historical volatility, Summit Materials is 25.58 times less risky than Enlight Renewable. It trades about 0.06 of its potential returns per unit of risk. Enlight Renewable Energy is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,980  in Enlight Renewable Energy on September 26, 2024 and sell it today you would lose (340.00) from holding Enlight Renewable Energy or give up 17.17% of portfolio value over 90 days.

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

Summit Materials  vs.  Enlight Renewable Energy

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

Enlight Renewable Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enlight Renewable Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Enlight Renewable is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Summit Materials and Enlight Renewable

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

The idea behind Summit Materials and Enlight Renewable Energy 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.