Correlation Between Equillium and Summit Therapeutics

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

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

Diversification Opportunities for Equillium and Summit Therapeutics

0.11

Correlation Coefficient

Equillium  Summit Therapeutics

Average diversification

The 3 months correlation between Equillium and Summit is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Equillium 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 Equillium 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 Equillium 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 Equillium i.e., Equillium and Summit Therapeutics go up and down completely randomly.

Pair Corralation between Equillium and Summit Therapeutics

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.16 times more return on investment than Summit Therapeutics. However, Equillium is 1.16 times more volatile than Summit Therapeutics PLC. It trades about 0.09 of its potential returns per unit of risk. Summit Therapeutics PLC is currently generating about 0.04 per unit of risk. If you would invest  63.00  in Equillium on December 26, 2024 and sell it today you would earn a total of  17.00  from holding Equillium or generate 26.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Equillium  vs.  Summit Therapeutics PLC

Equillium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

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 3 (%) 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 Equillium and Summit Therapeutics

The main advantage of trading using opposite Equillium and Summit Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equillium 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 Equillium 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.