Correlation Between Ashford Hospitality and Summit Hotel

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

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

Diversification Opportunities for Ashford Hospitality and Summit Hotel

-0.28

Correlation Coefficient

Ashford Hospitality  Summit Hotel

Very good diversification

The 3 months correlation between Ashford and Summit is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust 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 Ashford Hospitality 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 Ashford Hospitality Trust 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 Ashford Hospitality i.e., Ashford Hospitality and Summit Hotel go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Summit Hotel

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 3.66 times more return on investment than Summit Hotel. However, Ashford Hospitality is 3.66 times more volatile than Summit Hotel Properties. It trades about 0.02 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.06 per unit of risk. If you would invest  1,360  in Ashford Hospitality Trust on September 13, 2024 and sell it today you would earn a total of  42.00  from holding Ashford Hospitality Trust or generate 3.09% return on investment over 90 days.

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

Ashford Hospitality Trust  vs.  Summit Hotel Properties

Ashford Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashford Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Summit Hotel Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ashford Hospitality and Summit Hotel

The main advantage of trading using opposite Ashford Hospitality and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashford Hospitality 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 Ashford Hospitality Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.