Correlation Between Genfit and Summit Therapeutics

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

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

Diversification Opportunities for Genfit and Summit Therapeutics

0.73

Correlation Coefficient

Genfit  Summit Therapeutics

Poor diversification

The 3 months correlation between Genfit and Summit is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Genfit 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 Genfit 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 Genfit 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 Genfit i.e., Genfit and Summit Therapeutics go up and down completely randomly.

Pair Corralation between Genfit and Summit Therapeutics

Given the investment horizon of 90 days Genfit is expected to under-perform the Summit Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Genfit is 1.98 times less risky than Summit Therapeutics. The stock trades about -0.16 of its potential returns per unit of risk. The Summit Therapeutics PLC is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,866  in Summit Therapeutics PLC on October 10, 2024 and sell it today you would lose (50.00) from holding Summit Therapeutics PLC or give up 2.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Genfit  vs.  Summit Therapeutics PLC

Genfit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genfit has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Summit Therapeutics PLC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Therapeutics PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable primary indicators, Summit Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Genfit and Summit Therapeutics

The main advantage of trading using opposite Genfit and Summit Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genfit 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 Genfit 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.