Correlation Between Summit Materials and Roper Technologies

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

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

Diversification Opportunities for Summit Materials and Roper Technologies

0.14

Correlation Coefficient

Summit Materials  Roper Technologies

Average diversification

The 3 months correlation between Summit and Roper is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials Cl and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies 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 Cl are associated (or correlated) with Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of Summit Materials i.e., Summit Materials and Roper Technologies go up and down completely randomly.

Pair Corralation between Summit Materials and Roper Technologies

Assuming the 90 days trading horizon Summit Materials is expected to generate 1.14 times less return on investment than Roper Technologies. But when comparing it to its historical volatility, Summit Materials Cl is 2.46 times less risky than Roper Technologies. It trades about 0.06 of its potential returns per unit of risk. Roper Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  43,416  in Roper Technologies on September 26, 2024 and sell it today you would earn a total of  9,251  from holding Roper Technologies or generate 21.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	93.12%
Values	Daily Returns

Summit Materials Cl  vs.  Roper Technologies

Summit Materials

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials Cl are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Roper Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Roper Technologies is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Summit Materials and Roper Technologies

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

The idea behind Summit Materials Cl and Roper Technologies 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.