Correlation Between Regional Health and Summit Hotel

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

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

Diversification Opportunities for Regional Health and Summit Hotel

-0.57

Correlation Coefficient

Regional Health  Summit Hotel

Excellent diversification

The 3 months correlation between Regional and Summit is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Regional Health Properties 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 Regional Health 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 Regional Health Properties 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 Regional Health i.e., Regional Health and Summit Hotel go up and down completely randomly.

Pair Corralation between Regional Health and Summit Hotel

Considering the 90-day investment horizon Regional Health Properties is expected to generate 13.62 times more return on investment than Summit Hotel. However, Regional Health is 13.62 times more volatile than Summit Hotel Properties. It trades about 0.13 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about -0.14 per unit of risk. If you would invest  151.00  in Regional Health Properties on December 20, 2024 and sell it today you would earn a total of  81.00  from holding Regional Health Properties or generate 53.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	50.85%
Values	Daily Returns

Regional Health Properties  vs.  Summit Hotel Properties

Regional Health Prop

Risk-Adjusted Performance

OK

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather weak technical indicators, Regional Health exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Regional Health and Summit Hotel

The main advantage of trading using opposite Regional Health and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Health 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 Regional Health Properties 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.