Correlation Between SANOK RUBBER and Summit Materials

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

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

Diversification Opportunities for SANOK RUBBER and Summit Materials

0.39

Correlation Coefficient

SANOK RUBBER  Summit Materials

Weak diversification

The 3 months correlation between SANOK and Summit is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding SANOK RUBBER ZY and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and SANOK RUBBER 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 SANOK RUBBER ZY 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 SANOK RUBBER i.e., SANOK RUBBER and Summit Materials go up and down completely randomly.

Pair Corralation between SANOK RUBBER and Summit Materials

Assuming the 90 days horizon SANOK RUBBER is expected to generate 1.27 times less return on investment than Summit Materials. In addition to that, SANOK RUBBER is 1.53 times more volatile than Summit Materials. It trades about 0.12 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.23 per unit of volatility. If you would invest  3,420  in Summit Materials on September 3, 2024 and sell it today you would earn a total of  1,400  from holding Summit Materials or generate 40.94% return on investment over 90 days.

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

SANOK RUBBER ZY  vs.  Summit Materials

SANOK RUBBER ZY

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SANOK RUBBER ZY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SANOK RUBBER reported solid returns over the last few months and may actually be approaching a breakup point.

Summit Materials

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SANOK RUBBER and Summit Materials

The main advantage of trading using opposite SANOK RUBBER and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SANOK RUBBER 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 SANOK RUBBER ZY 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.