Correlation Between FREEPORT and Summit Hotel

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

By analyzing existing cross correlation between FREEPORT MCMORAN INC 4375 and Summit Hotel Properties, you can compare the effects of market volatilities on FREEPORT 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 FREEPORT with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of FREEPORT and Summit Hotel.

Diversification Opportunities for FREEPORT and Summit Hotel

-0.09

Correlation Coefficient

FREEPORT  Summit Hotel

Good diversification

The 3 months correlation between FREEPORT and Summit is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FREEPORT MCMORAN INC 4375 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 FREEPORT 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 FREEPORT MCMORAN INC 4375 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 FREEPORT i.e., FREEPORT and Summit Hotel go up and down completely randomly.

Pair Corralation between FREEPORT and Summit Hotel

Assuming the 90 days trading horizon FREEPORT MCMORAN INC 4375 is expected to under-perform the Summit Hotel. But the bond apears to be less risky and, when comparing its historical volatility, FREEPORT MCMORAN INC 4375 is 2.25 times less risky than Summit Hotel. The bond trades about -0.24 of its potential returns per unit of risk. The Summit Hotel Properties is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  637.00  in Summit Hotel Properties on September 23, 2024 and sell it today you would earn a total of  45.00  from holding Summit Hotel Properties or generate 7.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

FREEPORT MCMORAN INC 4375  vs.  Summit Hotel Properties

FREEPORT MCMORAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FREEPORT MCMORAN INC 4375 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FREEPORT is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Summit Hotel Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Summit Hotel Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with FREEPORT and Summit Hotel

The main advantage of trading using opposite FREEPORT and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FREEPORT 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 FREEPORT MCMORAN INC 4375 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.