Correlation Between Summit Materials and Allient

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

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

Diversification Opportunities for Summit Materials and Allient

0.82

Correlation Coefficient

Summit Materials  Allient

Very poor diversification

The 3 months correlation between Summit and Allient is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Allient in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allient 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 Allient. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allient has no effect on the direction of Summit Materials i.e., Summit Materials and Allient go up and down completely randomly.

Pair Corralation between Summit Materials and Allient

Considering the 90-day investment horizon Summit Materials is expected to generate 0.72 times more return on investment than Allient. However, Summit Materials is 1.39 times less risky than Allient. It trades about 0.06 of its potential returns per unit of risk. Allient is currently generating about -0.02 per unit of risk. If you would invest  2,969  in Summit Materials on September 29, 2024 and sell it today you would earn a total of  2,087  from holding Summit Materials or generate 70.29% return on investment over 90 days.

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

Summit Materials  vs.  Allient

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 very unfluctuating basic indicators, Summit Materials displayed solid returns over the last few months and may actually be approaching a breakup point.

Allient

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Allient are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Allient unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Materials and Allient

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

The idea behind Summit Materials and Allient 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.