Correlation Between Summit Hotel and DOLFINES

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

Diversification Opportunities for Summit Hotel and DOLFINES

0.28

Correlation Coefficient

Summit Hotel  DOLFINES

Modest diversification

The 3 months correlation between Summit and DOLFINES is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and DOLFINES SA EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLFINES SA EO 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 DOLFINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLFINES SA EO has no effect on the direction of Summit Hotel i.e., Summit Hotel and DOLFINES go up and down completely randomly.

Pair Corralation between Summit Hotel and DOLFINES

Assuming the 90 days horizon Summit Hotel is expected to generate 137.37 times less return on investment than DOLFINES. But when comparing it to its historical volatility, Summit Hotel Properties is 36.11 times less risky than DOLFINES. It trades about 0.04 of its potential returns per unit of risk. DOLFINES SA EO is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  150.00  in DOLFINES SA EO on October 9, 2024 and sell it today you would lose (15.00) from holding DOLFINES SA EO or give up 10.0% of portfolio value over 90 days.

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

Summit Hotel Properties  vs.  DOLFINES SA EO

Summit Hotel Properties

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 6 (%) 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 February 2025.

DOLFINES SA EO

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DOLFINES SA EO are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, DOLFINES reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and DOLFINES

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

The idea behind Summit Hotel Properties and DOLFINES SA EO 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.

Check out your portfolio center.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.