Correlation Between Cheniere Energy and Summit Midstream

Can any of the company-specific risk be diversified away by investing in both Cheniere 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 Cheniere 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 Cheniere Energy Partners and Summit Midstream, you can compare the effects of market volatilities on Cheniere 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 Cheniere Energy with a short position of Summit Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Summit Midstream.

Diversification Opportunities for Cheniere Energy and Summit Midstream

0.64

Correlation Coefficient

Cheniere Energy  Summit Midstream

Poor diversification

The 3 months correlation between Cheniere and Summit is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Cheniere 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 Cheniere Energy Partners 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 Cheniere Energy i.e., Cheniere Energy and Summit Midstream go up and down completely randomly.

Pair Corralation between Cheniere Energy and Summit Midstream

Considering the 90-day investment horizon Cheniere Energy Partners is expected to under-perform the Summit Midstream. In addition to that, Cheniere Energy is 1.44 times more volatile than Summit Midstream. It trades about -0.18 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Cheniere Energy Partners  vs.  Summit Midstream

Cheniere Energy Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Cheniere Energy and Summit Midstream

The main advantage of trading using opposite Cheniere Energy and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere 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 Cheniere Energy Partners 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 Transaction History module to view history of all your transactions and understand their impact on performance.