Correlation Between 90932JAA0 and Summit Midstream

Can any of the company-specific risk be diversified away by investing in both 90932JAA0 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 90932JAA0 and Summit Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between US90932JAA07 and Summit Midstream, you can compare the effects of market volatilities on 90932JAA0 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 90932JAA0 with a short position of Summit Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of 90932JAA0 and Summit Midstream.

Diversification Opportunities for 90932JAA0 and Summit Midstream

0.05

Correlation Coefficient

90932JAA0  Summit Midstream

Significant diversification

The 3 months correlation between 90932JAA0 and Summit is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding US90932JAA07 and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and 90932JAA0 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 US90932JAA07 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 90932JAA0 i.e., 90932JAA0 and Summit Midstream go up and down completely randomly.

Pair Corralation between 90932JAA0 and Summit Midstream

Assuming the 90 days trading horizon 90932JAA0 is expected to generate 3.7 times less return on investment than Summit Midstream. In addition to that, 90932JAA0 is 1.77 times more volatile than Summit Midstream. It trades about 0.08 of its total potential returns per unit of risk. Summit Midstream is currently generating about 0.55 per unit of volatility. If you would invest  3,520  in Summit Midstream on October 25, 2024 and sell it today you would earn a total of  791.00  from holding Summit Midstream or generate 22.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.67%
Values	Daily Returns

US90932JAA07  vs.  Summit Midstream

US90932JAA07

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US90932JAA07 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 90932JAA0 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Summit Midstream

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, Summit Midstream exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 90932JAA0 and Summit Midstream

The main advantage of trading using opposite 90932JAA0 and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 90932JAA0 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 US90932JAA07 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.