Correlation Between Summit Midstream and Pure Cycle
Can any of the company-specific risk be diversified away by investing in both Summit Midstream and Pure Cycle 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 Pure Cycle into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Midstream and Pure Cycle, you can compare the effects of market volatilities on Summit Midstream and Pure Cycle 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 Pure Cycle. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Midstream and Pure Cycle.
Diversification Opportunities for Summit Midstream and Pure Cycle
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Pure is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and Pure Cycle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pure Cycle 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 Pure Cycle. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pure Cycle has no effect on the direction of Summit Midstream i.e., Summit Midstream and Pure Cycle go up and down completely randomly.
Pair Corralation between Summit Midstream and Pure Cycle
Considering the 90-day investment horizon Summit Midstream is expected to generate 0.51 times more return on investment than Pure Cycle. However, Summit Midstream is 1.96 times less risky than Pure Cycle. It trades about 0.01 of its potential returns per unit of risk. Pure Cycle is currently generating about -0.23 per unit of risk. If you would invest 3,747 in Summit Midstream on October 11, 2024 and sell it today you would earn a total of 8.00 from holding Summit Midstream or generate 0.21% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Midstream vs. Pure Cycle
Performance |
| Timeline |
| Summit Midstream |
| Pure Cycle |
Summit Midstream and Pure Cycle Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Midstream and Pure Cycle
The main advantage of trading using opposite Summit Midstream and Pure Cycle positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Midstream position performs unexpectedly, Pure Cycle 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 Pure Cycle will offset losses from the drop in Pure Cycle's long position.| Summit Midstream vs. Lion One Metals | Summit Midstream vs. Perseus Mining Limited | Summit Midstream vs. Fernhill Beverage | Summit Midstream vs. Insteel Industries |
| Pure Cycle vs. Cadiz Inc | Pure Cycle vs. Artesian Resources | Pure Cycle vs. Global Water Resources | Pure Cycle vs. Parke Bancorp |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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