Correlation Between Vita Coco and Summit Materials
Can any of the company-specific risk be diversified away by investing in both Vita Coco 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 Vita Coco and Summit Materials into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vita Coco and Summit Materials, you can compare the effects of market volatilities on Vita Coco 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 Vita Coco with a short position of Summit Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vita Coco and Summit Materials.
Diversification Opportunities for Vita Coco and Summit Materials
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Vita and Summit is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Summit Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Materials and Vita Coco 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 Vita Coco 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 Vita Coco i.e., Vita Coco and Summit Materials go up and down completely randomly.
Pair Corralation between Vita Coco and Summit Materials
Given the investment horizon of 90 days Vita Coco is expected to generate 1.43 times more return on investment than Summit Materials. However, Vita Coco is 1.43 times more volatile than Summit Materials. It trades about 0.09 of its potential returns per unit of risk. Summit Materials is currently generating about -0.26 per unit of risk. If you would invest 2,395 in Vita Coco on January 30, 2024 and sell it today you would earn a total of 80.00 from holding Vita Coco or generate 3.34% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.45% |
Values | Daily Returns |
Vita Coco vs. Summit Materials
Performance |
Timeline |
Vita Coco |
Summit Materials |
Vita Coco and Summit Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Vita Coco and Summit Materials
The main advantage of trading using opposite Vita Coco and Summit Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vita Coco 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.Vita Coco vs. Kodiak Energy | Vita Coco vs. Trustcash Holdings | Vita Coco vs. M Line Hldgs | Vita Coco vs. Aquagold International |
Summit Materials vs. Martin Marietta Materials | Summit Materials vs. Vulcan Materials | Summit Materials vs. United States Lime |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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