Correlation Between Summit Materials and Vera Bradley

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

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

Diversification Opportunities for Summit Materials and Vera Bradley

-0.26

Correlation Coefficient

Summit Materials  Vera Bradley

Very good diversification

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

Pair Corralation between Summit Materials and Vera Bradley

Considering the 90-day investment horizon Summit Materials is expected to generate 0.04 times more return on investment than Vera Bradley. However, Summit Materials is 24.52 times less risky than Vera Bradley. It trades about -0.13 of its potential returns per unit of risk. Vera Bradley is currently generating about -0.32 per unit of risk. If you would invest  5,092  in Summit Materials on October 3, 2024 and sell it today you would lose (32.00) from holding Summit Materials or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Summit Materials  vs.  Vera Bradley

Summit Materials

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 21 (%) 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.

Vera Bradley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vera Bradley has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Summit Materials and Vera Bradley

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

The idea behind Summit Materials and Vera Bradley 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.