Correlation Between 025537AX9 and Summit Materials

Can any of the company-specific risk be diversified away by investing in both 025537AX9 and Summit Materials 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 025537AX9 and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AEP 5625 01 MAR 33 and Summit Materials, you can compare the effects of market volatilities on 025537AX9 and Summit Materials 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 025537AX9 with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of 025537AX9 and Summit Materials.

Diversification Opportunities for 025537AX9 and Summit Materials

0.41

Correlation Coefficient

025537AX9  Summit Materials

Very weak diversification

The 3 months correlation between 025537AX9 and Summit is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding AEP 5625 01 MAR 33 and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and 025537AX9 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 AEP 5625 01 MAR 33 are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of 025537AX9 i.e., 025537AX9 and Summit Materials go up and down completely randomly.

Pair Corralation between 025537AX9 and Summit Materials

Assuming the 90 days trading horizon 025537AX9 is expected to generate 4.2 times less return on investment than Summit Materials. In addition to that, 025537AX9 is 1.25 times more volatile than Summit Materials. It trades about 0.06 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.29 per unit of volatility. If you would invest  5,059  in Summit Materials on December 23, 2024 and sell it today you would earn a total of  190.00  from holding Summit Materials or generate 3.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.38%
Values	Daily Returns

AEP 5625 01 MAR 33  vs.  Summit Materials

AEP 5625 01

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in AEP 5625 01 MAR 33 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 025537AX9 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with 025537AX9 and Summit Materials

The main advantage of trading using opposite 025537AX9 and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 025537AX9 position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.

The idea behind AEP 5625 01 MAR 33 and Summit Materials 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.