Correlation Between Summit Hotel and Volaris

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

Diversification Opportunities for Summit Hotel and Volaris

-0.17

Correlation Coefficient

Summit Hotel  Volaris

Good diversification

The 3 months correlation between Summit and Volaris is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Volaris in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Volaris 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 Volaris. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Volaris has no effect on the direction of Summit Hotel i.e., Summit Hotel and Volaris go up and down completely randomly.

Pair Corralation between Summit Hotel and Volaris

Considering the 90-day investment horizon Summit Hotel Properties is expected to generate 1.13 times more return on investment than Volaris. However, Summit Hotel is 1.13 times more volatile than Volaris. It trades about 0.14 of its potential returns per unit of risk. Volaris is currently generating about 0.15 per unit of risk. If you would invest  607.00  in Summit Hotel Properties on September 23, 2024 and sell it today you would earn a total of  75.00  from holding Summit Hotel Properties or generate 12.36% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Volaris

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.

Volaris

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Volaris are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Volaris unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and Volaris

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

The idea behind Summit Hotel Properties and Volaris 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..