Correlation Between Clime Investment and Summit Resources

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

By analyzing existing cross correlation between Clime Investment Management and Summit Resources Limited, you can compare the effects of market volatilities on Clime Investment and Summit Resources 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 Clime Investment with a short position of Summit Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clime Investment and Summit Resources.

Diversification Opportunities for Clime Investment and Summit Resources

0.09

Correlation Coefficient

Clime Investment  Summit Resources

Significant diversification

The 3 months correlation between Clime and Summit is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Clime Investment Management and Summit Resources Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Resources and Clime Investment 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 Clime Investment Management are associated (or correlated) with Summit Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Resources has no effect on the direction of Clime Investment i.e., Clime Investment and Summit Resources go up and down completely randomly.

Pair Corralation between Clime Investment and Summit Resources

Assuming the 90 days trading horizon Clime Investment is expected to generate 247.61 times less return on investment than Summit Resources. But when comparing it to its historical volatility, Clime Investment Management is 64.36 times less risky than Summit Resources. It trades about 0.07 of its potential returns per unit of risk. Summit Resources Limited is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  1.50  in Summit Resources Limited on September 5, 2024 and sell it today you would lose (0.20) from holding Summit Resources Limited or give up 13.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.35%
Values	Daily Returns

Clime Investment Management  vs.  Summit Resources Limited

Clime Investment Man

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Clime Investment Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Clime Investment may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Summit Resources

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Resources Limited are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain primary indicators, Summit Resources unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Clime Investment and Summit Resources

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

The idea behind Clime Investment Management and Summit Resources Limited 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.