Correlation Between EIDESVIK OFFSHORE and Summit Hotel

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

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

Diversification Opportunities for EIDESVIK OFFSHORE and Summit Hotel

-0.13

Correlation Coefficient

EIDESVIK OFFSHORE  Summit Hotel

Good diversification

The 3 months correlation between EIDESVIK and Summit is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding EIDESVIK OFFSHORE NK 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 EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE NK 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 EIDESVIK OFFSHORE i.e., EIDESVIK OFFSHORE and Summit Hotel go up and down completely randomly.

Pair Corralation between EIDESVIK OFFSHORE and Summit Hotel

Assuming the 90 days horizon EIDESVIK OFFSHORE NK is expected to under-perform the Summit Hotel. In addition to that, EIDESVIK OFFSHORE is 1.35 times more volatile than Summit Hotel Properties. It trades about -0.02 of its total potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.09 per unit of volatility. If you would invest  587.00  in Summit Hotel Properties on October 10, 2024 and sell it today you would earn a total of  63.00  from holding Summit Hotel Properties or generate 10.73% return on investment over 90 days.

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

EIDESVIK OFFSHORE NK  vs.  Summit Hotel Properties

EIDESVIK OFFSHORE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EIDESVIK OFFSHORE NK has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, EIDESVIK OFFSHORE is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Summit Hotel Properties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Summit Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with EIDESVIK OFFSHORE and Summit Hotel

The main advantage of trading using opposite EIDESVIK OFFSHORE and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EIDESVIK OFFSHORE 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 EIDESVIK OFFSHORE NK 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..