Correlation Between Nippon Light and Summit Hotel

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

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

Diversification Opportunities for Nippon Light and Summit Hotel

-0.22

Correlation Coefficient

Nippon Light  Summit Hotel

Very good diversification

The 3 months correlation between Nippon and Summit is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Nippon Light Metal and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties and Nippon Light 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 Nippon Light Metal are associated (or correlated) with Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Nippon Light i.e., Nippon Light and Summit Hotel go up and down completely randomly.

Pair Corralation between Nippon Light and Summit Hotel

Assuming the 90 days horizon Nippon Light Metal is expected to under-perform the Summit Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Nippon Light Metal is 1.32 times less risky than Summit Hotel. The stock trades about -0.01 of its potential returns per unit of risk. The Summit Hotel Properties is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  567.00  in Summit Hotel Properties on October 25, 2024 and sell it today you would earn a total of  68.00  from holding Summit Hotel Properties or generate 11.99% return on investment over 90 days.

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

Nippon Light Metal  vs.  Summit Hotel Properties

Nippon Light Metal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nippon Light Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Nippon Light is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Summit Hotel Properties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Summit Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nippon Light and Summit Hotel

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

The idea behind Nippon Light Metal and Summit Hotel Properties 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.