Correlation Between Summit Materials and WT Offshore

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

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

Diversification Opportunities for Summit Materials and WT Offshore

-0.64

Correlation Coefficient

Summit Materials  WT Offshore

Excellent diversification

The 3 months correlation between Summit and WTI is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and WT Offshore in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WT Offshore 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 WT Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WT Offshore has no effect on the direction of Summit Materials i.e., Summit Materials and WT Offshore go up and down completely randomly.

Pair Corralation between Summit Materials and WT Offshore

Considering the 90-day investment horizon Summit Materials is expected to generate 0.07 times more return on investment than WT Offshore. However, Summit Materials is 13.69 times less risky than WT Offshore. It trades about -0.07 of its potential returns per unit of risk. WT Offshore is currently generating about -0.28 per unit of risk. If you would invest  5,085  in Summit Materials on September 27, 2024 and sell it today you would lose (21.00) from holding Summit Materials or give up 0.41% of portfolio value over 90 days.

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

Summit Materials  vs.  WT Offshore

Summit Materials

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 18 (%) 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.

WT Offshore

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WT Offshore has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Summit Materials and WT Offshore

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

The idea behind Summit Materials and WT Offshore 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.