Correlation Between Summit Therapeutics and Tandem Diabetes
Can any of the company-specific risk be diversified away by investing in both Summit Therapeutics and Tandem Diabetes 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 Tandem Diabetes 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 Tandem Diabetes Care, you can compare the effects of market volatilities on Summit Therapeutics and Tandem Diabetes 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 Tandem Diabetes. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Therapeutics and Tandem Diabetes.
Diversification Opportunities for Summit Therapeutics and Tandem Diabetes
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Summit and Tandem is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Summit Therapeutics PLC and Tandem Diabetes Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tandem Diabetes Care 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 Tandem Diabetes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tandem Diabetes Care has no effect on the direction of Summit Therapeutics i.e., Summit Therapeutics and Tandem Diabetes go up and down completely randomly.
Pair Corralation between Summit Therapeutics and Tandem Diabetes
Given the investment horizon of 90 days Summit Therapeutics PLC is expected to generate 1.91 times more return on investment than Tandem Diabetes. However, Summit Therapeutics is 1.91 times more volatile than Tandem Diabetes Care. It trades about 0.12 of its potential returns per unit of risk. Tandem Diabetes Care is currently generating about -0.01 per unit of risk. If you would invest 784.00 in Summit Therapeutics PLC on October 7, 2024 and sell it today you would earn a total of 1,040 from holding Summit Therapeutics PLC or generate 132.65% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Summit Therapeutics PLC vs. Tandem Diabetes Care
Performance |
Timeline |
Summit Therapeutics PLC |
Tandem Diabetes Care |
Summit Therapeutics and Tandem Diabetes Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Summit Therapeutics and Tandem Diabetes
The main advantage of trading using opposite Summit Therapeutics and Tandem Diabetes positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Therapeutics position performs unexpectedly, Tandem Diabetes 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 Tandem Diabetes will offset losses from the drop in Tandem Diabetes' long position.Summit Therapeutics vs. Nkarta Inc | Summit Therapeutics vs. Cullinan Oncology LLC | Summit Therapeutics vs. Kezar Life Sciences | Summit Therapeutics vs. Kronos Bio |
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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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