Correlation Between 512807AN8 and Summit Materials

Can any of the company-specific risk be diversified away by investing in both 512807AN8 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 512807AN8 and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LAM RESH P and Summit Materials, you can compare the effects of market volatilities on 512807AN8 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 512807AN8 with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of 512807AN8 and Summit Materials.

Diversification Opportunities for 512807AN8 and Summit Materials

-0.26

Correlation Coefficient

512807AN8  Summit Materials

Very good diversification

The 3 months correlation between 512807AN8 and Summit is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding LAM RESH P and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and 512807AN8 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 LAM RESH P 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 512807AN8 i.e., 512807AN8 and Summit Materials go up and down completely randomly.

Pair Corralation between 512807AN8 and Summit Materials

Assuming the 90 days trading horizon LAM RESH P is not expected to generate positive returns. However, LAM RESH P is 6.22 times less risky than Summit Materials. It waists most of its returns potential to compensate for thr risk taken. Summit Materials is generating about 0.25 per unit of risk. If you would invest  4,062  in Summit Materials on October 23, 2024 and sell it today you would earn a total of  1,157  from holding Summit Materials or generate 28.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

LAM RESH P  vs.  Summit Materials

LAM RESH P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LAM RESH P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 512807AN8 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

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 19 (%) 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.

Pair Trading with 512807AN8 and Summit Materials

The main advantage of trading using opposite 512807AN8 and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 512807AN8 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 LAM RESH P 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.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.