Correlation Between Summit Hotel and SLR Investment

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

Diversification Opportunities for Summit Hotel and SLR Investment

-0.27

Correlation Coefficient

Summit Hotel  SLR Investment

Very good diversification

The 3 months correlation between Summit and SLR is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and SLR Investment Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SLR Investment Corp 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 SLR Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SLR Investment Corp has no effect on the direction of Summit Hotel i.e., Summit Hotel and SLR Investment go up and down completely randomly.

Pair Corralation between Summit Hotel and SLR Investment

Assuming the 90 days horizon Summit Hotel Properties is expected to under-perform the SLR Investment. In addition to that, Summit Hotel is 1.53 times more volatile than SLR Investment Corp. It trades about -0.05 of its total potential returns per unit of risk. SLR Investment Corp is currently generating about 0.1 per unit of volatility. If you would invest  1,555  in SLR Investment Corp on December 3, 2024 and sell it today you would earn a total of  99.00  from holding SLR Investment Corp or generate 6.37% return on investment over 90 days.

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

Summit Hotel Properties  vs.  SLR Investment Corp

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 nearly stable basic indicators, Summit Hotel is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

SLR Investment Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SLR Investment may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Summit Hotel and SLR Investment

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

The idea behind Summit Hotel Properties and SLR Investment Corp 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.