Correlation Between SGS SA and Summit Hotel

Can any of the company-specific risk be diversified away by investing in both SGS SA and Summit Hotel 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 SGS SA and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SGS SA and Summit Hotel Properties, you can compare the effects of market volatilities on SGS SA and Summit Hotel 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 SGS SA with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of SGS SA and Summit Hotel.

Diversification Opportunities for SGS SA and Summit Hotel

0.09

Correlation Coefficient

SGS SA  Summit Hotel

Significant diversification

The 3 months correlation between SGS and Summit is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding SGS SA and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties and SGS SA 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 SGS SA are associated (or correlated) with Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of SGS SA i.e., SGS SA and Summit Hotel go up and down completely randomly.

Pair Corralation between SGS SA and Summit Hotel

Assuming the 90 days horizon SGS SA is expected to generate 1.28 times more return on investment than Summit Hotel. However, SGS SA is 1.28 times more volatile than Summit Hotel Properties. It trades about 0.06 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.03 per unit of risk. If you would invest  7,777  in SGS SA on September 15, 2024 and sell it today you would earn a total of  1,963  from holding SGS SA or generate 25.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	78.07%
Values	Daily Returns

SGS SA  vs.  Summit Hotel Properties

SGS SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SGS SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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. In spite of very conflicting basic indicators, Summit Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SGS SA and Summit Hotel

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

The idea behind SGS SA and Summit Hotel Properties 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.