Correlation Between Summit Hotel and Meituan

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

Diversification Opportunities for Summit Hotel and Meituan

0.07

Correlation Coefficient

Summit Hotel  Meituan

Significant diversification

The 3 months correlation between Summit and Meituan is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Meituan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meituan 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 Meituan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meituan has no effect on the direction of Summit Hotel i.e., Summit Hotel and Meituan go up and down completely randomly.

Pair Corralation between Summit Hotel and Meituan

Assuming the 90 days horizon Summit Hotel is expected to generate 3.19 times less return on investment than Meituan. But when comparing it to its historical volatility, Summit Hotel Properties is 2.33 times less risky than Meituan. It trades about 0.1 of its potential returns per unit of risk. Meituan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,407  in Meituan on September 13, 2024 and sell it today you would earn a total of  688.00  from holding Meituan or generate 48.9% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Meituan

Summit Hotel Properties

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 8 (%) 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.

Meituan

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Meituan are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Meituan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and Meituan

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

The idea behind Summit Hotel Properties and Meituan 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.