Correlation Between Mesabi Trust and Summit Midstream

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

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

Diversification Opportunities for Mesabi Trust and Summit Midstream

0.68

Correlation Coefficient

Mesabi Trust  Summit Midstream

Poor diversification

The 3 months correlation between Mesabi and Summit is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Mesabi Trust and Summit Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream Partners and Mesabi Trust 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 Mesabi Trust 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 Partners has no effect on the direction of Mesabi Trust i.e., Mesabi Trust and Summit Midstream go up and down completely randomly.

Pair Corralation between Mesabi Trust and Summit Midstream

Considering the 90-day investment horizon Mesabi Trust is expected to generate 0.25 times more return on investment than Summit Midstream. However, Mesabi Trust is 3.93 times less risky than Summit Midstream. It trades about 0.08 of its potential returns per unit of risk. Summit Midstream Partners is currently generating about 0.0 per unit of risk. If you would invest  1,878  in Mesabi Trust on October 2, 2024 and sell it today you would earn a total of  930.50  from holding Mesabi Trust or generate 49.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	54.15%
Values	Daily Returns

Mesabi Trust  vs.  Summit Midstream Partners

Mesabi Trust

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mesabi Trust are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Mesabi Trust sustained solid returns over the last few months and may actually be approaching a breakup point.

Summit Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Summit Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Mesabi Trust and Summit Midstream

The main advantage of trading using opposite Mesabi Trust and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mesabi Trust 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 Mesabi Trust and Summit Midstream Partners 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.