Correlation Between Summit Midstream and Golar LNG
Can any of the company-specific risk be diversified away by investing in both Summit Midstream and Golar LNG 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 Midstream and Golar LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Midstream and Golar LNG Limited, you can compare the effects of market volatilities on Summit Midstream and Golar LNG 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 Midstream with a short position of Golar LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Midstream and Golar LNG.
Diversification Opportunities for Summit Midstream and Golar LNG
-0.21 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and Golar is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and Golar LNG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golar LNG Limited and Summit Midstream 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 Midstream are associated (or correlated) with Golar LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golar LNG Limited has no effect on the direction of Summit Midstream i.e., Summit Midstream and Golar LNG go up and down completely randomly.
Pair Corralation between Summit Midstream and Golar LNG
Considering the 90-day investment horizon Summit Midstream is expected to generate 1.77 times more return on investment than Golar LNG. However, Summit Midstream is 1.77 times more volatile than Golar LNG Limited. It trades about 0.05 of its potential returns per unit of risk. Golar LNG Limited is currently generating about 0.07 per unit of risk. If you would invest 1,975 in Summit Midstream on August 30, 2024 and sell it today you would earn a total of 1,771 from holding Summit Midstream or generate 89.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Midstream vs. Golar LNG Limited
Performance |
| Timeline |
| Summit Midstream |
| Golar LNG Limited |
Summit Midstream and Golar LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Midstream and Golar LNG
The main advantage of trading using opposite Summit Midstream and Golar LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Midstream position performs unexpectedly, Golar LNG 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 Golar LNG will offset losses from the drop in Golar LNG's long position.| Summit Midstream vs. Plains All American | Summit Midstream vs. Genesis Energy LP | Summit Midstream vs. Hess Midstream Partners | Summit Midstream vs. Kinder Morgan |
| Golar LNG vs. Teekay Tankers | Golar LNG vs. International Seaways | Golar LNG vs. Frontline | Golar LNG vs. DHT Holdings |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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