Correlation Between Summit Hotel and BANK MANDIRI

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

Diversification Opportunities for Summit Hotel and BANK MANDIRI

0.85

Correlation Coefficient

Summit Hotel  BANK MANDIRI

Very poor diversification

The 3 months correlation between Summit and BANK is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and BANK MANDIRI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BANK MANDIRI 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 BANK MANDIRI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BANK MANDIRI has no effect on the direction of Summit Hotel i.e., Summit Hotel and BANK MANDIRI go up and down completely randomly.

Pair Corralation between Summit Hotel and BANK MANDIRI

Assuming the 90 days horizon Summit Hotel Properties is expected to under-perform the BANK MANDIRI. But the stock apears to be less risky and, when comparing its historical volatility, Summit Hotel Properties is 1.56 times less risky than BANK MANDIRI. The stock trades about -0.15 of its potential returns per unit of risk. The BANK MANDIRI is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  32.00  in BANK MANDIRI on December 28, 2024 and sell it today you would lose (5.00) from holding BANK MANDIRI or give up 15.62% of portfolio value over 90 days.

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

Summit Hotel Properties  vs.  BANK MANDIRI

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

BANK MANDIRI

Risk-Adjusted Performance

Very Weak

Over the last 90 days BANK MANDIRI has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Summit Hotel and BANK MANDIRI

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

The idea behind Summit Hotel Properties and BANK MANDIRI 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.