Correlation Between Eisai and Summit Midstream

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

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

Diversification Opportunities for Eisai and Summit Midstream

-0.73

Correlation Coefficient

Eisai  Summit Midstream

Pay attention - limited upside

The 3 months correlation between Eisai and Summit is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Eisai Co and Summit Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream Partners and Eisai 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 Eisai Co 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 Partners has no effect on the direction of Eisai i.e., Eisai and Summit Midstream go up and down completely randomly.

Pair Corralation between Eisai and Summit Midstream

Assuming the 90 days horizon Eisai Co is expected to under-perform the Summit Midstream. But the pink sheet apears to be less risky and, when comparing its historical volatility, Eisai Co is 2.49 times less risky than Summit Midstream. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Summit Midstream Partners is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,554  in Summit Midstream Partners on September 12, 2024 and sell it today you would lose (1,554) from holding Summit Midstream Partners or give up 100.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	80.56%
Values	Daily Returns

Eisai Co  vs.  Summit Midstream Partners

Eisai

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eisai Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Summit Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, Summit Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Eisai and Summit Midstream

The main advantage of trading using opposite Eisai and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eisai 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 Eisai Co and Summit Midstream Partners 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.