Correlation Between Summit Hotel and Arrow Electronics

Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Arrow Electronics 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 Arrow Electronics 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 Arrow Electronics, you can compare the effects of market volatilities on Summit Hotel and Arrow Electronics 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 Arrow Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Arrow Electronics.

Diversification Opportunities for Summit Hotel and Arrow Electronics

0.49

Correlation Coefficient

Summit Hotel  Arrow Electronics

Very weak diversification

The 3 months correlation between Summit and Arrow is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Arrow Electronics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Electronics 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 Arrow Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Electronics has no effect on the direction of Summit Hotel i.e., Summit Hotel and Arrow Electronics go up and down completely randomly.

Pair Corralation between Summit Hotel and Arrow Electronics

Considering the 90-day investment horizon Summit Hotel Properties is expected to generate 1.44 times more return on investment than Arrow Electronics. However, Summit Hotel is 1.44 times more volatile than Arrow Electronics. It trades about 0.2 of its potential returns per unit of risk. Arrow Electronics is currently generating about -0.02 per unit of risk. If you would invest  603.00  in Summit Hotel Properties on September 2, 2024 and sell it today you would earn a total of  55.00  from holding Summit Hotel Properties or generate 9.12% 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.  Arrow Electronics

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 latest stock price disarray, may contribute to short-term losses for the investors.

Arrow Electronics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Electronics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Arrow Electronics is not utilizing all of its potentials. The newest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Summit Hotel and Arrow Electronics

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

The idea behind Summit Hotel Properties and Arrow Electronics 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.