Correlation Between Sabre Insurance and Summit Hotel

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

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

Diversification Opportunities for Sabre Insurance and Summit Hotel

0.0

Correlation Coefficient

Sabre Insurance  Summit Hotel

Pay attention - limited upside

The 3 months correlation between Sabre and Summit is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sabre Insurance Group 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 Sabre Insurance 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 Sabre Insurance Group 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 Sabre Insurance i.e., Sabre Insurance and Summit Hotel go up and down completely randomly.

Pair Corralation between Sabre Insurance and Summit Hotel

Assuming the 90 days horizon Sabre Insurance is expected to generate 11.04 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, Sabre Insurance Group is 12.28 times less risky than Summit Hotel. It trades about 0.09 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  572.00  in Summit Hotel Properties on September 23, 2024 and sell it today you would earn a total of  110.00  from holding Summit Hotel Properties or generate 19.23% return on investment over 90 days.

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

Sabre Insurance Group  vs.  Summit Hotel Properties

Sabre Insurance Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sabre Insurance Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Sabre Insurance is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with Sabre Insurance and Summit Hotel

The main advantage of trading using opposite Sabre Insurance and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sabre Insurance 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 Sabre Insurance Group 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.