Correlation Between Sable Offshore and Summit Midstream

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

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

Diversification Opportunities for Sable Offshore and Summit Midstream

0.02

Correlation Coefficient

Sable Offshore  Summit Midstream

Significant diversification

The 3 months correlation between Sable and Summit is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sable Offshore Corp and Summit Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Midstream and Sable Offshore 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 Sable Offshore Corp 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 has no effect on the direction of Sable Offshore i.e., Sable Offshore and Summit Midstream go up and down completely randomly.

Pair Corralation between Sable Offshore and Summit Midstream

Considering the 90-day investment horizon Sable Offshore Corp is expected to generate 0.92 times more return on investment than Summit Midstream. However, Sable Offshore Corp is 1.09 times less risky than Summit Midstream. It trades about 0.07 of its potential returns per unit of risk. Summit Midstream is currently generating about 0.06 per unit of risk. If you would invest  1,008  in Sable Offshore Corp on September 23, 2024 and sell it today you would earn a total of  1,219  from holding Sable Offshore Corp or generate 120.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	94.57%
Values	Daily Returns

Sable Offshore Corp  vs.  Summit Midstream

Sable Offshore Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sable Offshore Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Sable Offshore is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Summit Midstream

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Midstream has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with Sable Offshore and Summit Midstream

The main advantage of trading using opposite Sable Offshore and Summit Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sable Offshore 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 Sable Offshore Corp and Summit Midstream 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.