Correlation Between Summit Materials and Procyon

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

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

Diversification Opportunities for Summit Materials and Procyon

-0.47

Correlation Coefficient

Summit Materials  Procyon

Very good diversification

The 3 months correlation between Summit and Procyon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Procyon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procyon 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 Procyon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procyon has no effect on the direction of Summit Materials i.e., Summit Materials and Procyon go up and down completely randomly.

Pair Corralation between Summit Materials and Procyon

Considering the 90-day investment horizon Summit Materials is expected to generate 1.32 times less return on investment than Procyon. But when comparing it to its historical volatility, Summit Materials is 3.04 times less risky than Procyon. It trades about 0.06 of its potential returns per unit of risk. Procyon is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  27.00  in Procyon on September 29, 2024 and sell it today you would lose (3.00) from holding Procyon or give up 11.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.8%
Values	Daily Returns

Summit Materials  vs.  Procyon

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.

Procyon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procyon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Procyon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Summit Materials and Procyon

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

The idea behind Summit Materials and Procyon 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.