Correlation Between Summit Hotel and DATAGROUP

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

Diversification Opportunities for Summit Hotel and DATAGROUP

0.62

Correlation Coefficient

Summit Hotel  DATAGROUP

Poor diversification

The 3 months correlation between Summit and DATAGROUP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and DATAGROUP SE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DATAGROUP SE 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 DATAGROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DATAGROUP SE has no effect on the direction of Summit Hotel i.e., Summit Hotel and DATAGROUP go up and down completely randomly.

Pair Corralation between Summit Hotel and DATAGROUP

Assuming the 90 days horizon Summit Hotel Properties is expected to generate 0.88 times more return on investment than DATAGROUP. However, Summit Hotel Properties is 1.13 times less risky than DATAGROUP. It trades about 0.09 of its potential returns per unit of risk. DATAGROUP SE is currently generating about 0.01 per unit of risk. If you would invest  530.00  in Summit Hotel Properties on September 22, 2024 and sell it today you would earn a total of  120.00  from holding Summit Hotel Properties or generate 22.64% return on investment over 90 days.

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

Summit Hotel Properties  vs.  DATAGROUP SE

Summit Hotel Properties

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Summit Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DATAGROUP SE

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DATAGROUP SE are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DATAGROUP unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and DATAGROUP

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

The idea behind Summit Hotel Properties and DATAGROUP SE 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.