Correlation Between Summit Materials and Genuine Parts

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Can any of the company-specific risk be diversified away by investing in both Summit Materials and Genuine Parts 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 Genuine Parts into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Genuine Parts Co, you can compare the effects of market volatilities on Summit Materials and Genuine Parts 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 Genuine Parts. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Genuine Parts.

Diversification Opportunities for Summit Materials and Genuine Parts

-0.62
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Summit and Genuine is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Genuine Parts Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genuine Parts 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 Genuine Parts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genuine Parts has no effect on the direction of Summit Materials i.e., Summit Materials and Genuine Parts go up and down completely randomly.

Pair Corralation between Summit Materials and Genuine Parts

Considering the 90-day investment horizon Summit Materials is expected to generate 0.96 times more return on investment than Genuine Parts. However, Summit Materials is 1.04 times less risky than Genuine Parts. It trades about 0.07 of its potential returns per unit of risk. Genuine Parts Co is currently generating about -0.03 per unit of risk. If you would invest  3,826  in Summit Materials on October 7, 2024 and sell it today you would earn a total of  1,277  from holding Summit Materials or generate 33.38% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Summit Materials  vs.  Genuine Parts Co

 Performance 
       Timeline  
Summit Materials 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 22 (%) 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.
Genuine Parts 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Genuine Parts Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Summit Materials and Genuine Parts Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Summit Materials and Genuine Parts

The main advantage of trading using opposite Summit Materials and Genuine Parts positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Genuine Parts 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 Genuine Parts will offset losses from the drop in Genuine Parts' long position.
The idea behind Summit Materials and Genuine Parts Co 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 Commodity Directory module to find actively traded commodities issued by global exchanges.

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