Correlation Between Summit Therapeutics and IHH Healthcare

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

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

Diversification Opportunities for Summit Therapeutics and IHH Healthcare

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Correlation Coefficient

Summit Therapeutics  IHH Healthcare

Pay attention - limited upside

The 3 months correlation between Summit and IHH is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Summit Therapeutics PLC and IHH Healthcare Berhad in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IHH Healthcare Berhad and Summit Therapeutics 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 Therapeutics PLC are associated (or correlated) with IHH Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IHH Healthcare Berhad has no effect on the direction of Summit Therapeutics i.e., Summit Therapeutics and IHH Healthcare go up and down completely randomly.

Pair Corralation between Summit Therapeutics and IHH Healthcare

Given the investment horizon of 90 days Summit Therapeutics PLC is expected to generate 8.86 times more return on investment than IHH Healthcare. However, Summit Therapeutics is 8.86 times more volatile than IHH Healthcare Berhad. It trades about 0.06 of its potential returns per unit of risk. IHH Healthcare Berhad is currently generating about -0.01 per unit of risk. If you would invest  377.00  in Summit Therapeutics PLC on September 29, 2024 and sell it today you would earn a total of  1,444  from holding Summit Therapeutics PLC or generate 383.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	68.35%
Values	Daily Returns

Summit Therapeutics PLC  vs.  IHH Healthcare Berhad

Summit Therapeutics PLC

Risk-Adjusted Performance

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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.

IHH Healthcare Berhad

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IHH Healthcare Berhad has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, IHH Healthcare is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Summit Therapeutics and IHH Healthcare

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

The idea behind Summit Therapeutics PLC and IHH Healthcare Berhad 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .