Correlation Between Gentex and Summit Midstream

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

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

Diversification Opportunities for Gentex and Summit Midstream

-0.48

Correlation Coefficient

Gentex  Summit Midstream

Very good diversification

The 3 months correlation between Gentex and Summit is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Gentex and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Gentex 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 Gentex 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 Gentex i.e., Gentex and Summit Midstream go up and down completely randomly.

Pair Corralation between Gentex and Summit Midstream

Given the investment horizon of 90 days Gentex is expected to under-perform the Summit Midstream. But the stock apears to be less risky and, when comparing its historical volatility, Gentex is 1.57 times less risky than Summit Midstream. The stock trades about -0.15 of its potential returns per unit of risk. The Summit Midstream is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  3,500  in Summit Midstream on October 26, 2024 and sell it today you would earn a total of  811.00  from holding Summit Midstream or generate 23.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Gentex  vs.  Summit Midstream

Gentex

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gentex has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Summit Midstream

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Summit Midstream exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gentex and Summit Midstream

The main advantage of trading using opposite Gentex and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gentex 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 Gentex 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.