Correlation Between Summit Midstream and DT Midstream

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

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

Diversification Opportunities for Summit Midstream and DT Midstream

0.72

Correlation Coefficient

Summit Midstream  DT Midstream

Poor diversification

The 3 months correlation between Summit and DTM is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream Partners and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream 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 Partners are associated (or correlated) with DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Summit Midstream i.e., Summit Midstream and DT Midstream go up and down completely randomly.

Pair Corralation between Summit Midstream and DT Midstream

If you would invest (100.00) in Summit Midstream Partners on September 12, 2024 and sell it today you would earn a total of  100.00  from holding Summit Midstream Partners or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

Summit Midstream Partners  vs.  DT Midstream

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.

DT Midstream

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, DT Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Midstream and DT Midstream

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

The idea behind Summit Midstream Partners and DT Midstream 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.