Correlation Between Ardelyx and Summit Therapeutics

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

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

Diversification Opportunities for Ardelyx and Summit Therapeutics

0.39

Correlation Coefficient

Ardelyx  Summit Therapeutics

Weak diversification

The 3 months correlation between Ardelyx and Summit is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ardelyx and Summit Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Therapeutics PLC and Ardelyx 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 Ardelyx are associated (or correlated) with Summit Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Therapeutics PLC has no effect on the direction of Ardelyx i.e., Ardelyx and Summit Therapeutics go up and down completely randomly.

Pair Corralation between Ardelyx and Summit Therapeutics

Given the investment horizon of 90 days Ardelyx is expected to under-perform the Summit Therapeutics. In addition to that, Ardelyx is 1.09 times more volatile than Summit Therapeutics PLC. It trades about -0.11 of its total potential returns per unit of risk. Summit Therapeutics PLC is currently generating about -0.06 per unit of volatility. If you would invest  1,919  in Summit Therapeutics PLC on September 24, 2024 and sell it today you would lose (113.00) from holding Summit Therapeutics PLC or give up 5.89% of portfolio value over 90 days.

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

Ardelyx  vs.  Summit Therapeutics PLC

Ardelyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardelyx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ardelyx and Summit Therapeutics

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

The idea behind Ardelyx and Summit Therapeutics 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.