Correlation Between Summit Materials and Nabors Industries

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

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

Diversification Opportunities for Summit Materials and Nabors Industries

-0.19

Correlation Coefficient

Summit Materials  Nabors Industries

Good diversification

The 3 months correlation between Summit and Nabors is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Nabors Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nabors Industries 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 Nabors Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nabors Industries has no effect on the direction of Summit Materials i.e., Summit Materials and Nabors Industries go up and down completely randomly.

Pair Corralation between Summit Materials and Nabors Industries

Considering the 90-day investment horizon Summit Materials is expected to generate 0.13 times more return on investment than Nabors Industries. However, Summit Materials is 7.79 times less risky than Nabors Industries. It trades about -0.04 of its potential returns per unit of risk. Nabors Industries is currently generating about -0.8 per unit of risk. If you would invest  5,075  in Summit Materials on September 25, 2024 and sell it today you would lose (11.00) from holding Summit Materials or give up 0.22% of portfolio value over 90 days.

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

Summit Materials  vs.  Nabors Industries

Summit Materials

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 18 (%) 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.

Nabors Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nabors Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Summit Materials and Nabors Industries

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

The idea behind Summit Materials and Nabors Industries 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.