Correlation Between United Insurance and Summit Hotel

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

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

Diversification Opportunities for United Insurance and Summit Hotel

0.7

Correlation Coefficient

United Insurance  Summit Hotel

Poor diversification

The 3 months correlation between United and Summit is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding United Insurance Holdings and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties and United Insurance 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 United Insurance Holdings are associated (or correlated) with Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of United Insurance i.e., United Insurance and Summit Hotel go up and down completely randomly.

Pair Corralation between United Insurance and Summit Hotel

Assuming the 90 days horizon United Insurance Holdings is expected to under-perform the Summit Hotel. In addition to that, United Insurance is 1.28 times more volatile than Summit Hotel Properties. It trades about -0.14 of its total potential returns per unit of risk. Summit Hotel Properties is currently generating about -0.05 per unit of volatility. If you would invest  650.00  in Summit Hotel Properties on October 26, 2024 and sell it today you would lose (10.00) from holding Summit Hotel Properties or give up 1.54% of portfolio value over 90 days.

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

United Insurance Holdings  vs.  Summit Hotel Properties

United Insurance Holdings

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in United Insurance Holdings are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, United Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Summit Hotel Properties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Summit Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Insurance and Summit Hotel

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

The idea behind United Insurance Holdings and Summit Hotel Properties 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.