Correlation Between Avenue Therapeutics and Summit Therapeutics

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

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

Diversification Opportunities for Avenue Therapeutics and Summit Therapeutics

-0.46

Correlation Coefficient

Avenue Therapeutics  Summit Therapeutics

Very good diversification

The 3 months correlation between Avenue and Summit is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Avenue Therapeutics 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 Avenue Therapeutics 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 Avenue Therapeutics 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 Avenue Therapeutics i.e., Avenue Therapeutics and Summit Therapeutics go up and down completely randomly.

Pair Corralation between Avenue Therapeutics and Summit Therapeutics

Given the investment horizon of 90 days Avenue Therapeutics is expected to under-perform the Summit Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Avenue Therapeutics is 1.07 times less risky than Summit Therapeutics. The stock trades about -0.16 of its potential returns per unit of risk. The Summit Therapeutics PLC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,849  in Summit Therapeutics PLC on December 2, 2024 and sell it today you would earn a total of  220.00  from holding Summit Therapeutics PLC or generate 11.9% return on investment over 90 days.

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

Avenue Therapeutics  vs.  Summit Therapeutics PLC

Avenue Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avenue Therapeutics 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Summit Therapeutics PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Therapeutics PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, Summit Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avenue Therapeutics and Summit Therapeutics

The main advantage of trading using opposite Avenue Therapeutics and Summit Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avenue Therapeutics 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 Avenue Therapeutics 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.