Correlation Between Summit Midstream and BorgWarner

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

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

Diversification Opportunities for Summit Midstream and BorgWarner

0.05

Correlation Coefficient

Summit Midstream  BorgWarner

Significant diversification

The 3 months correlation between Summit and BorgWarner is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and BorgWarner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BorgWarner and Summit Midstream 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 Summit Midstream are associated (or correlated) with BorgWarner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BorgWarner has no effect on the direction of Summit Midstream i.e., Summit Midstream and BorgWarner go up and down completely randomly.

Pair Corralation between Summit Midstream and BorgWarner

Considering the 90-day investment horizon Summit Midstream is expected to generate 0.99 times more return on investment than BorgWarner. However, Summit Midstream is 1.01 times less risky than BorgWarner. It trades about 0.09 of its potential returns per unit of risk. BorgWarner is currently generating about -0.1 per unit of risk. If you would invest  3,503  in Summit Midstream on October 7, 2024 and sell it today you would earn a total of  297.00  from holding Summit Midstream or generate 8.48% return on investment over 90 days.

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

Summit Midstream  vs.  BorgWarner

Summit Midstream

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Summit Midstream may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BorgWarner

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BorgWarner has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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.

Pair Trading with Summit Midstream and BorgWarner

The main advantage of trading using opposite Summit Midstream and BorgWarner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Midstream position performs unexpectedly, BorgWarner 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 BorgWarner will offset losses from the drop in BorgWarner's long position.

The idea behind Summit Midstream and BorgWarner 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.