Correlation Between Summit Materials and Franklin Credit

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

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

Diversification Opportunities for Summit Materials and Franklin Credit

0.38

Correlation Coefficient

Summit Materials  Franklin Credit

Weak diversification

The 3 months correlation between Summit and Franklin is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Franklin Credit Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Credit Mana 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 Franklin Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Credit Mana has no effect on the direction of Summit Materials i.e., Summit Materials and Franklin Credit go up and down completely randomly.

Pair Corralation between Summit Materials and Franklin Credit

Considering the 90-day investment horizon Summit Materials is expected to generate 0.47 times more return on investment than Franklin Credit. However, Summit Materials is 2.12 times less risky than Franklin Credit. It trades about 0.23 of its potential returns per unit of risk. Franklin Credit Management is currently generating about 0.06 per unit of risk. If you would invest  3,859  in Summit Materials on September 25, 2024 and sell it today you would earn a total of  1,191  from holding Summit Materials or generate 30.86% return on investment over 90 days.

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

Summit Materials  vs.  Franklin Credit Management

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

Franklin Credit Mana

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Credit Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Franklin Credit displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Materials and Franklin Credit

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

The idea behind Summit Materials and Franklin Credit Management 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.