Correlation Between East Africa and Summit Midstream

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

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

Diversification Opportunities for East Africa and Summit Midstream

0.0

Correlation Coefficient

East Africa  Summit Midstream

Pay attention - limited upside

The 3 months correlation between East and Summit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding East Africa Metals and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and East Africa 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 East Africa Metals 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 East Africa i.e., East Africa and Summit Midstream go up and down completely randomly.

Pair Corralation between East Africa and Summit Midstream

If you would invest  3,500  in Summit Midstream on October 24, 2024 and sell it today you would earn a total of  758.50  from holding Summit Midstream or generate 21.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

East Africa Metals  vs.  Summit Midstream

East Africa Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days East Africa Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, East Africa is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Summit Midstream

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent primary indicators, Summit Midstream exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with East Africa and Summit Midstream

The main advantage of trading using opposite East Africa and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if East Africa 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 East Africa Metals 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.