Correlation Between Summit Materials and GoHealth
Can any of the company-specific risk be diversified away by investing in both Summit Materials and GoHealth 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 GoHealth into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and GoHealth, you can compare the effects of market volatilities on Summit Materials and GoHealth 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 GoHealth. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and GoHealth.
Diversification Opportunities for Summit Materials and GoHealth
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and GoHealth is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and GoHealth in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GoHealth 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 GoHealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GoHealth has no effect on the direction of Summit Materials i.e., Summit Materials and GoHealth go up and down completely randomly.
Pair Corralation between Summit Materials and GoHealth
Considering the 90-day investment horizon Summit Materials is expected to generate 1.32 times less return on investment than GoHealth. But when comparing it to its historical volatility, Summit Materials is 2.53 times less risky than GoHealth. It trades about 0.07 of its potential returns per unit of risk. GoHealth is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,013 in GoHealth on September 23, 2024 and sell it today you would earn a total of 265.00 from holding GoHealth or generate 26.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Summit Materials vs. GoHealth
Performance |
Timeline |
Summit Materials |
GoHealth |
Summit Materials and GoHealth Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Materials and GoHealth
The main advantage of trading using opposite Summit Materials and GoHealth positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, GoHealth 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 GoHealth will offset losses from the drop in GoHealth's long position.Summit Materials vs. Vulcan Materials | Summit Materials vs. CRH PLC ADR | Summit Materials vs. Cemex SAB de | Summit Materials vs. Martin Marietta Materials |
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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