Correlation Between HYATT HOTELS and Summit Hotel

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

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

Diversification Opportunities for HYATT HOTELS and Summit Hotel

0.55

Correlation Coefficient

HYATT HOTELS  Summit Hotel

Very weak diversification

The 3 months correlation between HYATT and Summit is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding HYATT HOTELS A 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 HYATT HOTELS 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 HYATT HOTELS A 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 HYATT HOTELS i.e., HYATT HOTELS and Summit Hotel go up and down completely randomly.

Pair Corralation between HYATT HOTELS and Summit Hotel

Assuming the 90 days trading horizon HYATT HOTELS A is expected to generate 0.86 times more return on investment than Summit Hotel. However, HYATT HOTELS A is 1.16 times less risky than Summit Hotel. It trades about 0.12 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.1 per unit of risk. If you would invest  13,072  in HYATT HOTELS A on September 13, 2024 and sell it today you would earn a total of  1,993  from holding HYATT HOTELS A or generate 15.25% return on investment over 90 days.

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

HYATT HOTELS A  vs.  Summit Hotel Properties

HYATT HOTELS A

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HYATT HOTELS A are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HYATT HOTELS unveiled 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 fragile basic indicators, Summit Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HYATT HOTELS and Summit Hotel

The main advantage of trading using opposite HYATT HOTELS and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HYATT HOTELS 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 HYATT HOTELS A 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .