Correlation Between Summit Therapeutics and Viemed Healthcare

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

Diversification Opportunities for Summit Therapeutics and Viemed Healthcare

0.56

Correlation Coefficient

Summit Therapeutics  Viemed Healthcare

Very weak diversification

The 3 months correlation between Summit and Viemed is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Summit Therapeutics PLC and Viemed Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viemed Healthcare 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 Viemed Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viemed Healthcare has no effect on the direction of Summit Therapeutics i.e., Summit Therapeutics and Viemed Healthcare go up and down completely randomly.

Pair Corralation between Summit Therapeutics and Viemed Healthcare

Given the investment horizon of 90 days Summit Therapeutics PLC is expected to generate 3.21 times more return on investment than Viemed Healthcare. However, Summit Therapeutics is 3.21 times more volatile than Viemed Healthcare. It trades about 0.12 of its potential returns per unit of risk. Viemed Healthcare is currently generating about 0.1 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	Weak
Accuracy	100.0%
Values	Daily Returns

Summit Therapeutics PLC  vs.  Viemed Healthcare

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 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.

Viemed Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viemed Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Viemed Healthcare is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Summit Therapeutics and Viemed Healthcare

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

The idea behind Summit Therapeutics PLC and Viemed Healthcare 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.