Correlation Between Transportadora and Summit Midstream

Can any of the company-specific risk be diversified away by investing in both Transportadora and Summit Midstream 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 Transportadora and Summit Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Transportadora de Gas and Summit Midstream, you can compare the effects of market volatilities on Transportadora and Summit Midstream 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 Transportadora with a short position of Summit Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Transportadora and Summit Midstream.

Diversification Opportunities for Transportadora and Summit Midstream

0.61

Correlation Coefficient

Transportadora  Summit Midstream

Poor diversification

The 3 months correlation between Transportadora and Summit is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Transportadora de Gas and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Transportadora 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 Transportadora de Gas are associated (or correlated) with Summit Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Midstream has no effect on the direction of Transportadora i.e., Transportadora and Summit Midstream go up and down completely randomly.

Pair Corralation between Transportadora and Summit Midstream

Considering the 90-day investment horizon Transportadora de Gas is expected to generate 1.65 times more return on investment than Summit Midstream. However, Transportadora is 1.65 times more volatile than Summit Midstream. It trades about 0.18 of its potential returns per unit of risk. Summit Midstream is currently generating about 0.16 per unit of risk. If you would invest  2,088  in Transportadora de Gas on October 23, 2024 and sell it today you would earn a total of  740.00  from holding Transportadora de Gas or generate 35.44% return on investment over 90 days.

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

Transportadora de Gas  vs.  Summit Midstream

Transportadora de Gas

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Transportadora de Gas are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Transportadora unveiled solid returns over the last few months and may actually be approaching a breakup point.

Summit Midstream

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting primary indicators, Summit Midstream exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Transportadora and Summit Midstream

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

The idea behind Transportadora de Gas and Summit Midstream 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 Global Correlations module to find global opportunities by holding instruments from different markets.