Correlation Between Summit Materials and MASSACHUSETTS

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

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

Diversification Opportunities for Summit Materials and MASSACHUSETTS

-0.51

Correlation Coefficient

Summit Materials  MASSACHUSETTS

Excellent diversification

The 3 months correlation between Summit and MASSACHUSETTS is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and MASSACHUSETTS INST TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSACHUSETTS INST 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 MASSACHUSETTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSACHUSETTS INST has no effect on the direction of Summit Materials i.e., Summit Materials and MASSACHUSETTS go up and down completely randomly.

Pair Corralation between Summit Materials and MASSACHUSETTS

Considering the 90-day investment horizon Summit Materials is expected to generate 1.42 times more return on investment than MASSACHUSETTS. However, Summit Materials is 1.42 times more volatile than MASSACHUSETTS INST TECHNOLOGY. It trades about 0.23 of its potential returns per unit of risk. MASSACHUSETTS INST TECHNOLOGY is currently generating about 0.04 per unit of risk. If you would invest  4,143  in Summit Materials on September 21, 2024 and sell it today you would earn a total of  892.00  from holding Summit Materials or generate 21.53% return on investment over 90 days.

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

Summit Materials  vs.  MASSACHUSETTS INST TECHNOLOGY

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.

MASSACHUSETTS INST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASSACHUSETTS INST TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Summit Materials and MASSACHUSETTS

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

The idea behind Summit Materials and MASSACHUSETTS INST TECHNOLOGY 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.