Correlation Between CompoSecure and Summit Midstream

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

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

Diversification Opportunities for CompoSecure and Summit Midstream

0.26

Correlation Coefficient

CompoSecure  Summit Midstream

Modest diversification

The 3 months correlation between CompoSecure and Summit is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding CompoSecure and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and CompoSecure 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 CompoSecure 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 CompoSecure i.e., CompoSecure and Summit Midstream go up and down completely randomly.

Pair Corralation between CompoSecure and Summit Midstream

Assuming the 90 days horizon CompoSecure is expected to generate 18.23 times more return on investment than Summit Midstream. However, CompoSecure is 18.23 times more volatile than Summit Midstream. It trades about 0.08 of its potential returns per unit of risk. Summit Midstream is currently generating about 0.1 per unit of risk. If you would invest  34.00  in CompoSecure on October 9, 2024 and sell it today you would earn a total of  390.00  from holding CompoSecure or generate 1147.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.55%
Values	Daily Returns

CompoSecure  vs.  Summit Midstream

CompoSecure

Risk-Adjusted Performance

4 of 100

Insignificant

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

Summit Midstream

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 5 (%) 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 CompoSecure and Summit Midstream

The main advantage of trading using opposite CompoSecure and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CompoSecure 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 CompoSecure 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.