Correlation Between Summit Materials and ATRenew

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

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

Diversification Opportunities for Summit Materials and ATRenew

-0.26

Correlation Coefficient

Summit Materials  ATRenew

Very good diversification

The 3 months correlation between Summit and ATRenew is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and ATRenew Inc DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ATRenew Inc DRC 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 ATRenew. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ATRenew Inc DRC has no effect on the direction of Summit Materials i.e., Summit Materials and ATRenew go up and down completely randomly.

Pair Corralation between Summit Materials and ATRenew

Considering the 90-day investment horizon Summit Materials is expected to generate 2.33 times less return on investment than ATRenew. But when comparing it to its historical volatility, Summit Materials is 11.51 times less risky than ATRenew. It trades about 0.29 of its potential returns per unit of risk. ATRenew Inc DRC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  284.00  in ATRenew Inc DRC on December 21, 2024 and sell it today you would earn a total of  30.50  from holding ATRenew Inc DRC or generate 10.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	55.0%
Values	Daily Returns

Summit Materials  vs.  ATRenew Inc DRC

Summit Materials

Risk-Adjusted Performance

Solid

Over the last 90 days Summit Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unfluctuating basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in April 2025.

ATRenew Inc DRC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ATRenew Inc DRC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, ATRenew exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Materials and ATRenew

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

The idea behind Summit Materials and ATRenew Inc DRC 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.