Correlation Between Summit Hotel and REYNOLDS

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

Diversification Opportunities for Summit Hotel and REYNOLDS

-0.56

Correlation Coefficient

Summit Hotel  REYNOLDS

Excellent diversification

The 3 months correlation between Summit and REYNOLDS is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and REYNOLDS AMERN INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REYNOLDS AMERN INC 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 REYNOLDS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REYNOLDS AMERN INC has no effect on the direction of Summit Hotel i.e., Summit Hotel and REYNOLDS go up and down completely randomly.

Pair Corralation between Summit Hotel and REYNOLDS

Considering the 90-day investment horizon Summit Hotel Properties is expected to generate 1.55 times more return on investment than REYNOLDS. However, Summit Hotel is 1.55 times more volatile than REYNOLDS AMERN INC. It trades about 0.03 of its potential returns per unit of risk. REYNOLDS AMERN INC is currently generating about -0.07 per unit of risk. If you would invest  652.00  in Summit Hotel Properties on October 9, 2024 and sell it today you would earn a total of  19.00  from holding Summit Hotel Properties or generate 2.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.44%
Values	Daily Returns

Summit Hotel Properties  vs.  REYNOLDS AMERN INC

Summit Hotel Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 2 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

REYNOLDS AMERN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REYNOLDS AMERN INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, REYNOLDS is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Summit Hotel and REYNOLDS

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

The idea behind Summit Hotel Properties and REYNOLDS AMERN INC 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.