Correlation Between Summit Materials and G4S Plc

Can any of the company-specific risk be diversified away by investing in both Summit Materials and G4S Plc 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 G4S Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Materials and G4S Plc, you can compare the effects of market volatilities on Summit Materials and G4S Plc 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 G4S Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and G4S Plc.

Diversification Opportunities for Summit Materials and G4S Plc

0.0

Correlation Coefficient

Summit Materials  G4S Plc

Pay attention - limited upside

The 3 months correlation between Summit and G4S is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and G4S Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G4S Plc 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 G4S Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G4S Plc has no effect on the direction of Summit Materials i.e., Summit Materials and G4S Plc go up and down completely randomly.

Pair Corralation between Summit Materials and G4S Plc

If you would invest (100.00) in G4S Plc on February 5, 2024 and sell it today you would earn a total of  100.00  from holding G4S Plc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Summit Materials  vs.  G4S Plc

Summit Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Summit Materials may actually be approaching a critical reversion point that can send shares even higher in June 2024.

G4S Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days G4S Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, G4S Plc is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Summit Materials and G4S Plc

The main advantage of trading using opposite Summit Materials and G4S Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Materials position performs unexpectedly, G4S Plc 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 G4S Plc will offset losses from the drop in G4S Plc's long position.

The idea behind Summit Materials and G4S Plc 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.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.