Correlation Between Summit Materials and Powerstorm Holdings

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

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

Diversification Opportunities for Summit Materials and Powerstorm Holdings

-0.67

Correlation Coefficient

Summit Materials  Powerstorm Holdings

Excellent diversification

The 3 months correlation between Summit and Powerstorm is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Powerstorm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerstorm Holdings 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 Powerstorm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerstorm Holdings has no effect on the direction of Summit Materials i.e., Summit Materials and Powerstorm Holdings go up and down completely randomly.

Pair Corralation between Summit Materials and Powerstorm Holdings

Considering the 90-day investment horizon Summit Materials is expected to under-perform the Powerstorm Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Summit Materials is 31.77 times less risky than Powerstorm Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The Powerstorm Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1.30  in Powerstorm Holdings on October 1, 2024 and sell it today you would earn a total of  0.00  from holding Powerstorm Holdings or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

Summit Materials  vs.  Powerstorm Holdings

Summit Materials

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 19 (%) 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.

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Summit Materials and Powerstorm Holdings

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

The idea behind Summit Materials and Powerstorm Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.