Correlation Between Host Hotels and Summit Hotel

Can any of the company-specific risk be diversified away by investing in both Host 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 Host 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 Host Hotels Resorts and Summit Hotel Properties, you can compare the effects of market volatilities on Host 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 Host Hotels with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Host Hotels and Summit Hotel.

Diversification Opportunities for Host Hotels and Summit Hotel

0.62

Correlation Coefficient

Host Hotels  Summit Hotel

Poor diversification

The 3 months correlation between Host and Summit is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts 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 Host 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 Host Hotels Resorts 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 Host Hotels i.e., Host Hotels and Summit Hotel go up and down completely randomly.

Pair Corralation between Host Hotels and Summit Hotel

Considering the 90-day investment horizon Host Hotels is expected to generate 2.66 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, Host Hotels Resorts is 1.18 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 0.27 of returns per unit of risk over similar time horizon. If you would invest  608.00  in Summit Hotel Properties on September 21, 2024 and sell it today you would earn a total of  78.00  from holding Summit Hotel Properties or generate 12.83% return on investment over 90 days.

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

Host Hotels Resorts  vs.  Summit Hotel Properties

Host Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Host Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 Host Hotels and Summit Hotel

The main advantage of trading using opposite Host Hotels and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host 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 Host Hotels Resorts 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.