Correlation Between Summit Materials and Aspen Aerogels
Can any of the company-specific risk be diversified away by investing in both Summit Materials and Aspen Aerogels 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 Aspen Aerogels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Materials and Aspen Aerogels, you can compare the effects of market volatilities on Summit Materials and Aspen Aerogels 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 Aspen Aerogels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Aspen Aerogels.
Diversification Opportunities for Summit Materials and Aspen Aerogels
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Summit and Aspen is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Aspen Aerogels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Aerogels 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 Aspen Aerogels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Aerogels has no effect on the direction of Summit Materials i.e., Summit Materials and Aspen Aerogels go up and down completely randomly.
Pair Corralation between Summit Materials and Aspen Aerogels
Considering the 90-day investment horizon Summit Materials is expected to generate 2.21 times less return on investment than Aspen Aerogels. But when comparing it to its historical volatility, Summit Materials is 2.48 times less risky than Aspen Aerogels. It trades about 0.06 of its potential returns per unit of risk. Aspen Aerogels is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,085 in Aspen Aerogels on January 24, 2024 and sell it today you would earn a total of 578.00 from holding Aspen Aerogels or generate 53.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Materials vs. Aspen Aerogels
Performance |
| Timeline |
| Summit Materials |
| Aspen Aerogels |
Summit Materials and Aspen Aerogels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Materials and Aspen Aerogels
The main advantage of trading using opposite Summit Materials and Aspen Aerogels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, Aspen Aerogels 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 Aspen Aerogels will offset losses from the drop in Aspen Aerogels' long position.| Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime | Summit Materials vs. James Hardie Industries |
| Aspen Aerogels vs. Apyx Medical | Aspen Aerogels vs. Century Communities | Aspen Aerogels vs. Ardmore Shpng | Aspen Aerogels vs. American Assets Trust |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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