Correlation Between Summit Therapeutics and Hepion Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Summit Therapeutics and Hepion Pharmaceuticals 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 Hepion Pharmaceuticals 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 Hepion Pharmaceuticals, you can compare the effects of market volatilities on Summit Therapeutics and Hepion Pharmaceuticals 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 Hepion Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Therapeutics and Hepion Pharmaceuticals.

Diversification Opportunities for Summit Therapeutics and Hepion Pharmaceuticals

0.37

Correlation Coefficient

Summit Therapeutics  Hepion Pharmaceuticals

Weak diversification

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

Pair Corralation between Summit Therapeutics and Hepion Pharmaceuticals

Given the investment horizon of 90 days Summit Therapeutics PLC is expected to under-perform the Hepion Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Summit Therapeutics PLC is 2.16 times less risky than Hepion Pharmaceuticals. The stock trades about -0.01 of its potential returns per unit of risk. The Hepion Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  61.00  in Hepion Pharmaceuticals on October 10, 2024 and sell it today you would earn a total of  0.00  from holding Hepion Pharmaceuticals or generate 0.0% return on investment over 90 days.

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

Summit Therapeutics PLC  vs.  Hepion Pharmaceuticals

Summit Therapeutics PLC

Risk-Adjusted Performance

1 of 100

Very Weak

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

Hepion Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hepion Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Hepion Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Therapeutics and Hepion Pharmaceuticals

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

The idea behind Summit Therapeutics PLC and Hepion Pharmaceuticals 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.