Correlation Between Summit Hotel and Montana Technologies

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

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

Diversification Opportunities for Summit Hotel and Montana Technologies

0.51

Correlation Coefficient

Summit Hotel  Montana Technologies

Very weak diversification

The 3 months correlation between Summit and Montana is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Montana Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Montana Technologies and Summit Hotel 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 Summit Hotel Properties are associated (or correlated) with Montana Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Montana Technologies has no effect on the direction of Summit Hotel i.e., Summit Hotel and Montana Technologies go up and down completely randomly.

Pair Corralation between Summit Hotel and Montana Technologies

Considering the 90-day investment horizon Summit Hotel is expected to generate 32.13 times less return on investment than Montana Technologies. But when comparing it to its historical volatility, Summit Hotel Properties is 8.03 times less risky than Montana Technologies. It trades about 0.05 of its potential returns per unit of risk. Montana Technologies is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  82.00  in Montana Technologies on October 5, 2024 and sell it today you would earn a total of  32.00  from holding Montana Technologies or generate 39.02% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Montana Technologies

Summit Hotel Properties

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Montana Technologies

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Montana Technologies are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Montana Technologies showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and Montana Technologies

The main advantage of trading using opposite Summit Hotel and Montana Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Montana Technologies 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 Montana Technologies will offset losses from the drop in Montana Technologies' long position.

The idea behind Summit Hotel Properties and Montana Technologies 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.