Correlation Between Summit Therapeutics and ArcelorMittal

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

Diversification Opportunities for Summit Therapeutics and ArcelorMittal

0.16

Correlation Coefficient

Summit Therapeutics  ArcelorMittal

Average diversification

The 3 months correlation between Summit and ArcelorMittal is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Summit Therapeutics PLC and ArcelorMittal SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ArcelorMittal SA ADR 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 ArcelorMittal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ArcelorMittal SA ADR has no effect on the direction of Summit Therapeutics i.e., Summit Therapeutics and ArcelorMittal go up and down completely randomly.

Pair Corralation between Summit Therapeutics and ArcelorMittal

Given the investment horizon of 90 days Summit Therapeutics PLC is expected to under-perform the ArcelorMittal. In addition to that, Summit Therapeutics is 2.44 times more volatile than ArcelorMittal SA ADR. It trades about -0.05 of its total potential returns per unit of risk. ArcelorMittal SA ADR is currently generating about -0.05 per unit of volatility. If you would invest  2,355  in ArcelorMittal SA ADR on October 15, 2024 and sell it today you would lose (149.00) from holding ArcelorMittal SA ADR or give up 6.33% of portfolio value over 90 days.

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

Summit Therapeutics PLC  vs.  ArcelorMittal SA ADR

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

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 weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ArcelorMittal SA ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ArcelorMittal SA ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, ArcelorMittal is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Summit Therapeutics and ArcelorMittal

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

The idea behind Summit Therapeutics PLC and ArcelorMittal SA 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.