Correlation Between Pure Storage and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Pure Storage 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 Pure Storage and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pure Storage and Summit Materials, you can compare the effects of market volatilities on Pure Storage 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 Pure Storage with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pure Storage and Summit Materials.
Diversification Opportunities for Pure Storage and Summit Materials
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Pure and Summit is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Pure Storage and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Pure Storage 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 Pure Storage 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 Pure Storage i.e., Pure Storage and Summit Materials go up and down completely randomly.
Pair Corralation between Pure Storage and Summit Materials
Given the investment horizon of 90 days Pure Storage is expected to generate 1.29 times more return on investment than Summit Materials. However, Pure Storage is 1.29 times more volatile than Summit Materials. It trades about 0.05 of its potential returns per unit of risk. Summit Materials is currently generating about 0.05 per unit of risk. If you would invest 2,984 in Pure Storage on January 17, 2024 and sell it today you would earn a total of 2,246 from holding Pure Storage or generate 75.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pure Storage vs. Summit Materials
Performance |
| Timeline |
| Pure Storage |
| Summit Materials |
Pure Storage and Summit Materials Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pure Storage and Summit Materials
The main advantage of trading using opposite Pure Storage and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pure Storage 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.| Pure Storage vs. LG Display Co | Pure Storage vs. Sony Corp | Pure Storage vs. Sonos Inc | Pure Storage vs. Vizio Holding Corp |
| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime | Summit Materials vs. James Hardie Industries |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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