Correlation Between Arbor Metals and Summit Materials

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

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

Diversification Opportunities for Arbor Metals and Summit Materials

-0.82

Correlation Coefficient

Arbor Metals  Summit Materials

Pay attention - limited upside

The 3 months correlation between Arbor and Summit is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Arbor Metals Corp and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Arbor Metals 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 Arbor Metals Corp 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 Arbor Metals i.e., Arbor Metals and Summit Materials go up and down completely randomly.

Pair Corralation between Arbor Metals and Summit Materials

Assuming the 90 days horizon Arbor Metals Corp is expected to under-perform the Summit Materials. In addition to that, Arbor Metals is 1.87 times more volatile than Summit Materials. It trades about -0.05 of its total potential returns per unit of risk. Summit Materials is currently generating about 0.05 per unit of volatility. If you would invest  2,712  in Summit Materials on January 17, 2024 and sell it today you would earn a total of  1,307  from holding Summit Materials or generate 48.19% return on investment over 90 days.

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

Arbor Metals Corp  vs.  Summit Materials

Arbor Metals Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arbor Metals Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Summit Materials

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 9 (%) 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.

Pair Trading with Arbor Metals and Summit Materials

The main advantage of trading using opposite Arbor Metals and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arbor Metals 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 Arbor Metals Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.