Correlation Between Summit Materials and Penta Ocean

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

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

Diversification Opportunities for Summit Materials and Penta Ocean

-0.51

Correlation Coefficient

Summit Materials  Penta Ocean

Excellent diversification

The 3 months correlation between Summit and Penta is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Penta Ocean Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Penta Ocean Construc 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 Penta Ocean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Penta Ocean Construc has no effect on the direction of Summit Materials i.e., Summit Materials and Penta Ocean go up and down completely randomly.

Pair Corralation between Summit Materials and Penta Ocean

Assuming the 90 days trading horizon Summit Materials is expected to generate 1.32 times more return on investment than Penta Ocean. However, Summit Materials is 1.32 times more volatile than Penta Ocean Construction Co. It trades about 0.08 of its potential returns per unit of risk. Penta Ocean Construction Co is currently generating about -0.05 per unit of risk. If you would invest  3,120  in Summit Materials on September 23, 2024 and sell it today you would earn a total of  1,720  from holding Summit Materials or generate 55.13% return on investment over 90 days.

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

Summit Materials  vs.  Penta Ocean Construction Co

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 comparatively uncertain basic indicators, Summit Materials unveiled solid returns over the last few months and may actually be approaching a breakup point.

Penta Ocean Construc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Penta Ocean Construction Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Penta Ocean is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Summit Materials and Penta Ocean

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

The idea behind Summit Materials and Penta Ocean Construction Co 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.