Correlation Between Summit Hotel and Cheniere Energy

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

Diversification Opportunities for Summit Hotel and Cheniere Energy

0.2

Correlation Coefficient

Summit Hotel  Cheniere Energy

Modest diversification

The 3 months correlation between Summit and Cheniere is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners 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 Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of Summit Hotel i.e., Summit Hotel and Cheniere Energy go up and down completely randomly.

Pair Corralation between Summit Hotel and Cheniere Energy

Considering the 90-day investment horizon Summit Hotel is expected to generate 1.27 times less return on investment than Cheniere Energy. In addition to that, Summit Hotel is 1.13 times more volatile than Cheniere Energy Partners. It trades about 0.01 of its total potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.02 per unit of volatility. If you would invest  4,698  in Cheniere Energy Partners on September 23, 2024 and sell it today you would earn a total of  524.00  from holding Cheniere Energy Partners or generate 11.15% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Cheniere Energy Partners

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

Cheniere Energy Partners

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Summit Hotel and Cheniere Energy

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

The idea behind Summit Hotel Properties and Cheniere Energy Partners 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.