Correlation Between Summit Materials and United States

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

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

Diversification Opportunities for Summit Materials and United States

0.31

Correlation Coefficient

Summit Materials  United States

Weak diversification

The 3 months correlation between Summit and United is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and United States Lime in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Lime 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Lime has no effect on the direction of Summit Materials i.e., Summit Materials and United States go up and down completely randomly.

Pair Corralation between Summit Materials and United States

Considering the 90-day investment horizon Summit Materials is expected to generate 0.16 times more return on investment than United States. However, Summit Materials is 6.35 times less risky than United States. It trades about 0.33 of its potential returns per unit of risk. United States Lime is currently generating about -0.25 per unit of risk. If you would invest  5,054  in Summit Materials on December 28, 2024 and sell it today you would earn a total of  195.00  from holding Summit Materials or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	47.54%
Values	Daily Returns

Summit Materials  vs.  United States Lime

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.

United States Lime

Risk-Adjusted Performance

Very Weak

Over the last 90 days United States Lime has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Summit Materials and United States

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

The idea behind Summit Materials and United States Lime 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.