Correlation Between Summit Midstream and Xunlei

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

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

Diversification Opportunities for Summit Midstream and Xunlei

0.09

Correlation Coefficient

Summit Midstream  Xunlei

Significant diversification

The 3 months correlation between Summit and Xunlei is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and Xunlei Ltd Adr in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xunlei Ltd Adr 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 Xunlei. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xunlei Ltd Adr has no effect on the direction of Summit Midstream i.e., Summit Midstream and Xunlei go up and down completely randomly.

Pair Corralation between Summit Midstream and Xunlei

Considering the 90-day investment horizon Summit Midstream is expected to generate 1.05 times more return on investment than Xunlei. However, Summit Midstream is 1.05 times more volatile than Xunlei Ltd Adr. It trades about 0.06 of its potential returns per unit of risk. Xunlei Ltd Adr is currently generating about 0.02 per unit of risk. If you would invest  1,679  in Summit Midstream on October 3, 2024 and sell it today you would earn a total of  2,099  from holding Summit Midstream or generate 125.01% 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.  Xunlei Ltd Adr

Summit Midstream

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Summit Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Xunlei Ltd Adr

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Xunlei Ltd Adr are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Xunlei is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Summit Midstream and Xunlei

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

The idea behind Summit Midstream and Xunlei Ltd Adr 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.