Correlation Between Gulf Resources and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Gulf Resources 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 Gulf Resources and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Gulf Resources and Summit Materials, you can compare the effects of market volatilities on Gulf Resources 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 Gulf Resources with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Gulf Resources and Summit Materials.
Diversification Opportunities for Gulf Resources and Summit Materials
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Gulf and Summit is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Gulf Resources and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Gulf Resources 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 Gulf Resources 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 Gulf Resources i.e., Gulf Resources and Summit Materials go up and down completely randomly.
Pair Corralation between Gulf Resources and Summit Materials
Given the investment horizon of 90 days Gulf Resources is expected to generate 1.97 times more return on investment than Summit Materials. However, Gulf Resources is 1.97 times more volatile than Summit Materials. It trades about 0.2 of its potential returns per unit of risk. Summit Materials is currently generating about -0.29 per unit of risk. If you would invest 138.00 in Gulf Resources on February 5, 2024 and sell it today you would earn a total of 16.00 from holding Gulf Resources or generate 11.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Gulf Resources vs. Summit Materials
Performance |
Timeline |
Gulf Resources |
Summit Materials |
Gulf Resources and Summit Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Gulf Resources and Summit Materials
The main advantage of trading using opposite Gulf Resources and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gulf Resources 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.Gulf Resources vs. Energy and Environmental | Gulf Resources vs. First Graphene | Gulf Resources vs. ASP Isotopes Common |
Summit Materials vs. James Hardie Industries | Summit Materials vs. Loma Negra Compania | Summit Materials vs. Eagle Materials | Summit Materials vs. Cementos Pacasmayo SAA |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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