Correlation Between Summit Midstream and Martin Midstream

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

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

Diversification Opportunities for Summit Midstream and Martin Midstream

0.76

Correlation Coefficient

Summit Midstream  Martin Midstream

Poor diversification

The 3 months correlation between Summit and Martin is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Summit Midstream Partners and Martin Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Midstream Partners 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 Partners are associated (or correlated) with Martin Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Midstream Partners has no effect on the direction of Summit Midstream i.e., Summit Midstream and Martin Midstream go up and down completely randomly.

Pair Corralation between Summit Midstream and Martin Midstream

Given the investment horizon of 90 days Summit Midstream Partners is expected to generate 2.42 times more return on investment than Martin Midstream. However, Summit Midstream is 2.42 times more volatile than Martin Midstream Partners. It trades about 0.17 of its potential returns per unit of risk. Martin Midstream Partners is currently generating about 0.36 per unit of risk. If you would invest  2,778  in Summit Midstream Partners on March 2, 2024 and sell it today you would earn a total of  492.00  from holding Summit Midstream Partners or generate 17.71% return on investment over 90 days.

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

Summit Midstream Partners  vs.  Martin Midstream Partners

Summit Midstream Partners

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Midstream Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Summit Midstream reported solid returns over the last few months and may actually be approaching a breakup point.

Martin Midstream Partners

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Midstream Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Martin Midstream reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Midstream and Martin Midstream

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

The idea behind Summit Midstream Partners and Martin Midstream Partners 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.