Correlation Between Ark Restaurants and Summit Hotel

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

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

Diversification Opportunities for Ark Restaurants and Summit Hotel

0.56

Correlation Coefficient

Ark Restaurants  Summit Hotel

Very weak diversification

The 3 months correlation between Ark and Summit is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Ark Restaurants Corp 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 Ark Restaurants 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 Ark Restaurants Corp 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 Ark Restaurants i.e., Ark Restaurants and Summit Hotel go up and down completely randomly.

Pair Corralation between Ark Restaurants and Summit Hotel

Given the investment horizon of 90 days Ark Restaurants Corp is expected to generate 3.98 times more return on investment than Summit Hotel. However, Ark Restaurants is 3.98 times more volatile than Summit Hotel Properties. It trades about 0.12 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.31 per unit of risk. If you would invest  1,025  in Ark Restaurants Corp on September 19, 2024 and sell it today you would earn a total of  153.50  from holding Ark Restaurants Corp or generate 14.98% return on investment over 90 days.

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

Ark Restaurants Corp  vs.  Summit Hotel Properties

Ark Restaurants Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ark Restaurants Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward-looking signals, Ark Restaurants is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Summit Hotel Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Hotel Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ark Restaurants and Summit Hotel

The main advantage of trading using opposite Ark Restaurants and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ark Restaurants 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 Ark Restaurants Corp 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.