Correlation Between Arrow Financial and Summit Midstream

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

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

Diversification Opportunities for Arrow Financial and Summit Midstream

0.37

Correlation Coefficient

Arrow Financial  Summit Midstream

Weak diversification

The 3 months correlation between Arrow and Summit is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Arrow Financial 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 Arrow Financial are associated (or correlated) with Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream has no effect on the direction of Arrow Financial i.e., Arrow Financial and Summit Midstream go up and down completely randomly.

Pair Corralation between Arrow Financial and Summit Midstream

Given the investment horizon of 90 days Arrow Financial is expected to generate 10.87 times less return on investment than Summit Midstream. But when comparing it to its historical volatility, Arrow Financial is 1.49 times less risky than Summit Midstream. It trades about 0.01 of its potential returns per unit of risk. Summit Midstream is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,829  in Summit Midstream on October 4, 2024 and sell it today you would earn a total of  1,949  from holding Summit Midstream or generate 106.56% return on investment over 90 days.

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

Arrow Financial  vs.  Summit Midstream

Arrow Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Summit Midstream

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Summit Midstream is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Arrow Financial and Summit Midstream

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

The idea behind Arrow Financial and Summit Midstream 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.