Correlation Between Summit Materials and 631005BJ3

Can any of the company-specific risk be diversified away by investing in both Summit Materials and 631005BJ3 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 631005BJ3 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials and US631005BJ39, you can compare the effects of market volatilities on Summit Materials and 631005BJ3 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 631005BJ3. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and 631005BJ3.

Diversification Opportunities for Summit Materials and 631005BJ3

0.5

Correlation Coefficient

Summit Materials  631005BJ3

Very weak diversification

The 3 months correlation between Summit and 631005BJ3 is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and US631005BJ39 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US631005BJ39 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 631005BJ3. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US631005BJ39 has no effect on the direction of Summit Materials i.e., Summit Materials and 631005BJ3 go up and down completely randomly.

Pair Corralation between Summit Materials and 631005BJ3

Considering the 90-day investment horizon Summit Materials is expected to generate 1.77 times more return on investment than 631005BJ3. However, Summit Materials is 1.77 times more volatile than US631005BJ39. It trades about 0.16 of its potential returns per unit of risk. US631005BJ39 is currently generating about 0.16 per unit of risk. If you would invest  4,563  in Summit Materials on October 26, 2024 and sell it today you would earn a total of  657.00  from holding Summit Materials or generate 14.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	35.0%
Values	Daily Returns

Summit Materials  vs.  US631005BJ39

Summit Materials

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 12 (%) 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.

US631005BJ39

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US631005BJ39 are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, 631005BJ3 may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Summit Materials and 631005BJ3

The main advantage of trading using opposite Summit Materials and 631005BJ3 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, 631005BJ3 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 631005BJ3 will offset losses from the drop in 631005BJ3's long position.

The idea behind Summit Materials and US631005BJ39 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.