Correlation Between Summit Midstream and Griffon

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

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

Diversification Opportunities for Summit Midstream and Griffon

0.34

Correlation Coefficient

Summit Midstream  Griffon

Weak diversification

The 3 months correlation between Summit and Griffon is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of Summit Midstream i.e., Summit Midstream and Griffon go up and down completely randomly.

Pair Corralation between Summit Midstream and Griffon

Considering the 90-day investment horizon Summit Midstream is expected to generate 1.26 times more return on investment than Griffon. However, Summit Midstream is 1.26 times more volatile than Griffon. It trades about 0.07 of its potential returns per unit of risk. Griffon is currently generating about 0.01 per unit of risk. If you would invest  3,454  in Summit Midstream on December 19, 2024 and sell it today you would earn a total of  293.00  from holding Summit Midstream or generate 8.48% return on investment over 90 days.

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

Summit Midstream  vs.  Griffon

Summit Midstream

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Summit Midstream may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Griffon

Risk-Adjusted Performance

Very Weak

Over the last 90 days Griffon has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Griffon is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Summit Midstream and Griffon

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

The idea behind Summit Midstream and Griffon 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.