Correlation Between Brooge Energy and Summit Midstream

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

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

Diversification Opportunities for Brooge Energy and Summit Midstream

-0.31

Correlation Coefficient

Brooge Energy  Summit Midstream

Very good diversification

The 3 months correlation between Brooge and Summit is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Brooge Energy Limited and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Brooge Energy 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 Brooge Energy Limited 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 Brooge Energy i.e., Brooge Energy and Summit Midstream go up and down completely randomly.

Pair Corralation between Brooge Energy and Summit Midstream

Assuming the 90 days horizon Brooge Energy Limited is expected to under-perform the Summit Midstream. In addition to that, Brooge Energy is 19.37 times more volatile than Summit Midstream. It trades about -0.19 of its total potential returns per unit of risk. Summit Midstream is currently generating about -0.09 per unit of volatility. If you would invest  3,746  in Summit Midstream on September 28, 2024 and sell it today you would lose (98.00) from holding Summit Midstream or give up 2.62% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

Brooge Energy Limited  vs.  Summit Midstream

Brooge Energy Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Brooge Energy Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal technical and fundamental indicators, Brooge Energy showed solid returns over the last few months and may actually be approaching a breakup point.

Summit Midstream

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 3 (%) 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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Brooge Energy and Summit Midstream

The main advantage of trading using opposite Brooge Energy and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brooge Energy 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 Brooge Energy Limited 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.