Correlation Between SES SA and Summit Materials

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

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

Diversification Opportunities for SES SA and Summit Materials

-0.94

Correlation Coefficient

SES SA  Summit Materials

Pay attention - limited upside

The 3 months correlation between SES and Summit is -0.94. Overlapping area represents the amount of risk that can be diversified away by holding SES SA and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and SES SA 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 SES SA 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 SES SA i.e., SES SA and Summit Materials go up and down completely randomly.

Pair Corralation between SES SA and Summit Materials

Assuming the 90 days horizon SES SA is expected to under-perform the Summit Materials. But the stock apears to be less risky and, when comparing its historical volatility, SES SA is 1.11 times less risky than Summit Materials. The stock trades about -0.04 of its potential returns per unit of risk. The Summit Materials is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  4,620  in Summit Materials on September 14, 2024 and sell it today you would earn a total of  220.00  from holding Summit Materials or generate 4.76% return on investment over 90 days.

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

SES SA  vs.  Summit Materials

SES SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SES SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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.

Pair Trading with SES SA and Summit Materials

The main advantage of trading using opposite SES SA and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SES SA 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 SES SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.