Correlation Between Summit Materials and Melar Acquisition

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

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

Diversification Opportunities for Summit Materials and Melar Acquisition

0.7

Correlation Coefficient

Summit Materials  Melar Acquisition

Poor diversification

The 3 months correlation between Summit and Melar is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Melar Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melar Acquisition Corp 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 Melar Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melar Acquisition Corp has no effect on the direction of Summit Materials i.e., Summit Materials and Melar Acquisition go up and down completely randomly.

Pair Corralation between Summit Materials and Melar Acquisition

Considering the 90-day investment horizon Summit Materials is expected to under-perform the Melar Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Summit Materials is 1.54 times less risky than Melar Acquisition. The stock trades about -0.15 of its potential returns per unit of risk. The Melar Acquisition Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,004  in Melar Acquisition Corp on October 1, 2024 and sell it today you would earn a total of  2.00  from holding Melar Acquisition Corp or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Summit Materials  vs.  Melar Acquisition Corp

Summit Materials

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 19 (%) 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.

Melar Acquisition Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Melar Acquisition Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Melar Acquisition is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Summit Materials and Melar Acquisition

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

The idea behind Summit Materials and Melar Acquisition Corp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.