Correlation Between Summit Materials and 512807AN8

Can any of the company-specific risk be diversified away by investing in both Summit Materials and 512807AN8 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 512807AN8 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials and LAM RESH P, you can compare the effects of market volatilities on Summit Materials and 512807AN8 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 512807AN8. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and 512807AN8.

Diversification Opportunities for Summit Materials and 512807AN8

0.06

Correlation Coefficient

Summit Materials  512807AN8

Significant diversification

The 3 months correlation between Summit and 512807AN8 is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and LAM RESH P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LAM RESH P 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 512807AN8. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LAM RESH P has no effect on the direction of Summit Materials i.e., Summit Materials and 512807AN8 go up and down completely randomly.

Pair Corralation between Summit Materials and 512807AN8

Considering the 90-day investment horizon Summit Materials is expected to generate 3.12 times more return on investment than 512807AN8. However, Summit Materials is 3.12 times more volatile than LAM RESH P. It trades about 0.28 of its potential returns per unit of risk. LAM RESH P is currently generating about -0.01 per unit of risk. If you would invest  5,070  in Summit Materials on December 25, 2024 and sell it today you would earn a total of  179.00  from holding Summit Materials or generate 3.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	63.27%
Values	Daily Returns

Summit Materials  vs.  LAM RESH P

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.

LAM RESH P

Risk-Adjusted Performance

Very Weak

Over the last 90 days LAM RESH P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 512807AN8 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Summit Materials and 512807AN8

The main advantage of trading using opposite Summit Materials and 512807AN8 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, 512807AN8 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 512807AN8 will offset losses from the drop in 512807AN8's long position.

The idea behind Summit Materials and LAM RESH P 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.