Correlation Between Commonwealth Bank and Summit Midstream

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

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

Diversification Opportunities for Commonwealth Bank and Summit Midstream

0.53

Correlation Coefficient

Commonwealth Bank  Summit Midstream

Very weak diversification

The 3 months correlation between Commonwealth and Summit is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Commonwealth Bank of and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Commonwealth Bank 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 Commonwealth Bank of 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 Commonwealth Bank i.e., Commonwealth Bank and Summit Midstream go up and down completely randomly.

Pair Corralation between Commonwealth Bank and Summit Midstream

Assuming the 90 days horizon Commonwealth Bank is expected to generate 1.32 times less return on investment than Summit Midstream. But when comparing it to its historical volatility, Commonwealth Bank of is 1.53 times less risky than Summit Midstream. It trades about 0.05 of its potential returns per unit of risk. Summit Midstream is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,361  in Summit Midstream on September 26, 2024 and sell it today you would earn a total of  159.00  from holding Summit Midstream or generate 4.73% return on investment over 90 days.

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

Commonwealth Bank of  vs.  Summit Midstream

Commonwealth Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commonwealth Bank of are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Commonwealth Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Summit Midstream

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Summit Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Commonwealth Bank and Summit Midstream

The main advantage of trading using opposite Commonwealth Bank and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Commonwealth Bank 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 Commonwealth Bank of 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.