Correlation Between Summit Materials and Fastighets

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

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

Diversification Opportunities for Summit Materials and Fastighets

-0.7

Correlation Coefficient

Summit Materials  Fastighets

Excellent diversification

The 3 months correlation between Summit and Fastighets is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Fastighets AB Balder in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fastighets AB Balder 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 Fastighets. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fastighets AB Balder has no effect on the direction of Summit Materials i.e., Summit Materials and Fastighets go up and down completely randomly.

Pair Corralation between Summit Materials and Fastighets

Considering the 90-day investment horizon Summit Materials is expected to generate 0.8 times more return on investment than Fastighets. However, Summit Materials is 1.24 times less risky than Fastighets. It trades about 0.23 of its potential returns per unit of risk. Fastighets AB Balder is currently generating about -0.12 per unit of risk. If you would invest  3,871  in Summit Materials on September 27, 2024 and sell it today you would earn a total of  1,193  from holding Summit Materials or generate 30.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Summit Materials  vs.  Fastighets AB Balder

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

Fastighets AB Balder

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fastighets AB Balder has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental 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.

Pair Trading with Summit Materials and Fastighets

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

The idea behind Summit Materials and Fastighets AB Balder 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.