Correlation Between Summit Midstream and AmTrust Financial

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

By analyzing existing cross correlation between Summit Midstream and AmTrust Financial Services, you can compare the effects of market volatilities on Summit Midstream and AmTrust Financial 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 AmTrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Midstream and AmTrust Financial.

Diversification Opportunities for Summit Midstream and AmTrust Financial

0.33

Correlation Coefficient

Summit Midstream  AmTrust Financial

Weak diversification

The 3 months correlation between Summit and AmTrust is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and AmTrust Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmTrust Financial 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 AmTrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmTrust Financial has no effect on the direction of Summit Midstream i.e., Summit Midstream and AmTrust Financial go up and down completely randomly.

Pair Corralation between Summit Midstream and AmTrust Financial

Considering the 90-day investment horizon Summit Midstream is expected to under-perform the AmTrust Financial. But the stock apears to be less risky and, when comparing its historical volatility, Summit Midstream is 2.75 times less risky than AmTrust Financial. The stock trades about -0.25 of its potential returns per unit of risk. The AmTrust Financial Services is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,451  in AmTrust Financial Services on September 26, 2024 and sell it today you would lose (66.00) from holding AmTrust Financial Services or give up 4.55% of portfolio value over 90 days.

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

Summit Midstream  vs.  AmTrust Financial Services

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.

AmTrust Financial

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Summit Midstream and AmTrust Financial

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

The idea behind Summit Midstream and AmTrust Financial Services 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.