Correlation Between Summit Materials and Ibstock Plc

Can any of the company-specific risk be diversified away by investing in both Summit Materials and Ibstock 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 Ibstock 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 Ibstock plc, you can compare the effects of market volatilities on Summit Materials and Ibstock 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 Ibstock Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Materials and Ibstock Plc.

Diversification Opportunities for Summit Materials and Ibstock Plc

0.18

Correlation Coefficient

Summit Materials  Ibstock Plc

Average diversification

The 3 months correlation between Summit and Ibstock is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Summit Materials and Ibstock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ibstock 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 Ibstock Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ibstock plc has no effect on the direction of Summit Materials i.e., Summit Materials and Ibstock Plc go up and down completely randomly.

Pair Corralation between Summit Materials and Ibstock Plc

Considering the 90-day investment horizon Summit Materials is expected to generate 1.23 times more return on investment than Ibstock Plc. However, Summit Materials is 1.23 times more volatile than Ibstock plc. It trades about 0.06 of its potential returns per unit of risk. Ibstock plc is currently generating about -0.09 per unit of risk. If you would invest  3,056  in Summit Materials on February 3, 2024 and sell it today you would earn a total of  890.00  from holding Summit Materials or generate 29.12% return on investment over 90 days.

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

Summit Materials  vs.  Ibstock 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.

Ibstock plc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Summit Materials and Ibstock Plc

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

The idea behind Summit Materials and Ibstock 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.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.