Correlation Between Summit Therapeutics and CERo Therapeutics

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Can any of the company-specific risk be diversified away by investing in both Summit Therapeutics and CERo Therapeutics 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 Therapeutics and CERo Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Therapeutics PLC and CERo Therapeutics Holdings, you can compare the effects of market volatilities on Summit Therapeutics and CERo Therapeutics 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 Therapeutics with a short position of CERo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Therapeutics and CERo Therapeutics.

Diversification Opportunities for Summit Therapeutics and CERo Therapeutics

-0.37
  Correlation Coefficient

Very good diversification

The 3 months correlation between Summit and CERo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Summit Therapeutics PLC and CERo Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CERo Therapeutics and Summit Therapeutics 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 Therapeutics PLC are associated (or correlated) with CERo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CERo Therapeutics has no effect on the direction of Summit Therapeutics i.e., Summit Therapeutics and CERo Therapeutics go up and down completely randomly.

Pair Corralation between Summit Therapeutics and CERo Therapeutics

Given the investment horizon of 90 days Summit Therapeutics PLC is expected to generate 0.15 times more return on investment than CERo Therapeutics. However, Summit Therapeutics PLC is 6.87 times less risky than CERo Therapeutics. It trades about -0.06 of its potential returns per unit of risk. CERo Therapeutics Holdings is currently generating about -0.02 per unit of risk. If you would invest  1,900  in Summit Therapeutics PLC on September 23, 2024 and sell it today you would lose (113.00) from holding Summit Therapeutics PLC or give up 5.95% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Summit Therapeutics PLC  vs.  CERo Therapeutics Holdings

 Performance 
       Timeline  
Summit Therapeutics PLC 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.
CERo Therapeutics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in CERo Therapeutics Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, CERo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Summit Therapeutics and CERo Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Summit Therapeutics and CERo Therapeutics

The main advantage of trading using opposite Summit Therapeutics and CERo Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Therapeutics position performs unexpectedly, CERo Therapeutics 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 CERo Therapeutics will offset losses from the drop in CERo Therapeutics' long position.
The idea behind Summit Therapeutics PLC and CERo Therapeutics Holdings 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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