Correlation Between HCW Biologics and Summit Therapeutics

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

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

Diversification Opportunities for HCW Biologics and Summit Therapeutics

0.02

Correlation Coefficient

HCW Biologics  Summit Therapeutics

Significant diversification

The 3 months correlation between HCW and Summit is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics 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 HCW Biologics 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 HCW Biologics 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 HCW Biologics i.e., HCW Biologics and Summit Therapeutics go up and down completely randomly.

Pair Corralation between HCW Biologics and Summit Therapeutics

Given the investment horizon of 90 days HCW Biologics is expected to generate 3.22 times less return on investment than Summit Therapeutics. In addition to that, HCW Biologics is 1.14 times more volatile than Summit Therapeutics PLC. It trades about 0.02 of its total potential returns per unit of risk. Summit Therapeutics PLC is currently generating about 0.07 per unit of volatility. If you would invest  164.00  in Summit Therapeutics PLC on October 5, 2024 and sell it today you would earn a total of  1,685  from holding Summit Therapeutics PLC or generate 1027.44% return on investment over 90 days.

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

HCW Biologics  vs.  Summit Therapeutics PLC

HCW Biologics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Summit Therapeutics PLC

Risk-Adjusted Performance

1 of 100

Very 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 HCW Biologics and Summit Therapeutics

The main advantage of trading using opposite HCW Biologics and Summit Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCW Biologics 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 HCW Biologics 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.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.