Correlation Between Steven Madden and Summit Therapeutics

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

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

Diversification Opportunities for Steven Madden and Summit Therapeutics

0.56

Correlation Coefficient

Steven Madden  Summit Therapeutics

Very weak diversification

The 3 months correlation between Steven and Summit is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and Summit Therapeutics PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Therapeutics PLC and Steven Madden 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 Steven Madden are associated (or correlated) with Summit Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Therapeutics PLC has no effect on the direction of Steven Madden i.e., Steven Madden and Summit Therapeutics go up and down completely randomly.

Pair Corralation between Steven Madden and Summit Therapeutics

Given the investment horizon of 90 days Steven Madden is expected to generate 24.17 times less return on investment than Summit Therapeutics. But when comparing it to its historical volatility, Steven Madden is 11.26 times less risky than Summit Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Summit Therapeutics PLC is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  201.00  in Summit Therapeutics PLC on September 21, 2024 and sell it today you would earn a total of  1,639  from holding Summit Therapeutics PLC or generate 815.42% return on investment over 90 days.

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

Steven Madden  vs.  Summit Therapeutics PLC

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Summit Therapeutics PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Therapeutics PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Steven Madden and Summit Therapeutics

The main advantage of trading using opposite Steven Madden and Summit Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden position performs unexpectedly, Summit Therapeutics 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 Therapeutics will offset losses from the drop in Summit Therapeutics' long position.

The idea behind Steven Madden and Summit Therapeutics PLC 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.