Correlation Between Nasdaq and Summit Hotel

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

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

Diversification Opportunities for Nasdaq and Summit Hotel

-0.18

Correlation Coefficient

Nasdaq  Summit Hotel

Good diversification

The 3 months correlation between Nasdaq and Summit is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc 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 Nasdaq 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 Nasdaq Inc 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 Nasdaq i.e., Nasdaq and Summit Hotel go up and down completely randomly.

Pair Corralation between Nasdaq and Summit Hotel

Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.69 times more return on investment than Summit Hotel. However, Nasdaq Inc is 1.46 times less risky than Summit Hotel. It trades about 0.06 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.02 per unit of risk. If you would invest  5,153  in Nasdaq Inc on December 8, 2024 and sell it today you would earn a total of  2,282  from holding Nasdaq Inc or generate 44.28% return on investment over 90 days.

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

Nasdaq Inc  vs.  Summit Hotel Properties

Nasdaq Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nasdaq Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Summit Hotel Properties

Risk-Adjusted Performance

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

Pair Trading with Nasdaq and Summit Hotel

The main advantage of trading using opposite Nasdaq and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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 Nasdaq Inc 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.