Correlation Between Summit Midstream and Brooge Holdings

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

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

Diversification Opportunities for Summit Midstream and Brooge Holdings

-0.53

Correlation Coefficient

Summit Midstream  Brooge Holdings

Excellent diversification

The 3 months correlation between Summit and Brooge is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream and Brooge Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooge Holdings 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 Brooge Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooge Holdings has no effect on the direction of Summit Midstream i.e., Summit Midstream and Brooge Holdings go up and down completely randomly.

Pair Corralation between Summit Midstream and Brooge Holdings

Considering the 90-day investment horizon Summit Midstream is expected to generate 0.64 times more return on investment than Brooge Holdings. However, Summit Midstream is 1.57 times less risky than Brooge Holdings. It trades about 0.08 of its potential returns per unit of risk. Brooge Holdings is currently generating about -0.03 per unit of risk. If you would invest  1,560  in Summit Midstream on August 31, 2024 and sell it today you would earn a total of  2,219  from holding Summit Midstream or generate 142.24% return on investment over 90 days.

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

Summit Midstream  vs.  Brooge Holdings

Summit Midstream

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream are ranked lower than 1 (%) 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.

Brooge Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brooge Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Brooge Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Midstream and Brooge Holdings

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

The idea behind Summit Midstream and Brooge Holdings 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.