Correlation Between 26875PAU5 and Summit Materials

Can any of the company-specific risk be diversified away by investing in both 26875PAU5 and Summit Materials 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 26875PAU5 and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between EOG RESOURCES INC and Summit Materials, you can compare the effects of market volatilities on 26875PAU5 and Summit Materials 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 26875PAU5 with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of 26875PAU5 and Summit Materials.

Diversification Opportunities for 26875PAU5 and Summit Materials

-0.79

Correlation Coefficient

26875PAU5  Summit Materials

Pay attention - limited upside

The 3 months correlation between 26875PAU5 and Summit is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding EOG RESOURCES INC and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and 26875PAU5 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 EOG RESOURCES INC are associated (or correlated) with Summit Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Materials has no effect on the direction of 26875PAU5 i.e., 26875PAU5 and Summit Materials go up and down completely randomly.

Pair Corralation between 26875PAU5 and Summit Materials

Assuming the 90 days trading horizon EOG RESOURCES INC is expected to under-perform the Summit Materials. But the bond apears to be less risky and, when comparing its historical volatility, EOG RESOURCES INC is 3.99 times less risky than Summit Materials. The bond trades about -0.07 of its potential returns per unit of risk. The Summit Materials is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  3,871  in Summit Materials on September 27, 2024 and sell it today you would earn a total of  1,199  from holding Summit Materials or generate 30.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

EOG RESOURCES INC  vs.  Summit Materials

EOG RESOURCES INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EOG RESOURCES INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 26875PAU5 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with 26875PAU5 and Summit Materials

The main advantage of trading using opposite 26875PAU5 and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 26875PAU5 position performs unexpectedly, Summit Materials 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 Summit Materials will offset losses from the drop in Summit Materials' long position.

The idea behind EOG RESOURCES INC and Summit Materials 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.