Correlation Between European Wax and Summit Hotel

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

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

Diversification Opportunities for European Wax and Summit Hotel

-0.33

Correlation Coefficient

European Wax  Summit Hotel

Very good diversification

The 3 months correlation between European and Summit is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding European Wax Center 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 European Wax 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 European Wax Center 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 European Wax i.e., European Wax and Summit Hotel go up and down completely randomly.

Pair Corralation between European Wax and Summit Hotel

Given the investment horizon of 90 days European Wax Center is expected to generate 3.04 times more return on investment than Summit Hotel. However, European Wax is 3.04 times more volatile than Summit Hotel Properties. It trades about 0.11 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about -0.05 per unit of risk. If you would invest  610.00  in European Wax Center on October 4, 2024 and sell it today you would earn a total of  57.00  from holding European Wax Center or generate 9.34% return on investment over 90 days.

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

European Wax Center  vs.  Summit Hotel Properties

European Wax Center

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days European Wax Center has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, European Wax is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Summit Hotel Properties

Risk-Adjusted Performance

0 of 100

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 European Wax and Summit Hotel

The main advantage of trading using opposite European Wax and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if European Wax 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 European Wax Center 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 CEOs Directory module to screen CEOs from public companies around the world.