Correlation Between Walmart and Summit Hotel

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

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

Diversification Opportunities for Walmart and Summit Hotel

0.7

Correlation Coefficient

Walmart  Summit Hotel

Poor diversification

The 3 months correlation between Walmart and Summit is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Walmart 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 Walmart 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 Walmart 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 Walmart i.e., Walmart and Summit Hotel go up and down completely randomly.

Pair Corralation between Walmart and Summit Hotel

Assuming the 90 days trading horizon Walmart is expected to generate 0.79 times more return on investment than Summit Hotel. However, Walmart is 1.26 times less risky than Summit Hotel. It trades about -0.07 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about -0.18 per unit of risk. If you would invest  8,564  in Walmart on December 23, 2024 and sell it today you would lose (647.00) from holding Walmart or give up 7.55% of portfolio value over 90 days.

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

Walmart  vs.  Summit Hotel Properties

Walmart

Risk-Adjusted Performance

Very Weak

Over the last 90 days Walmart has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with Walmart and Summit Hotel

The main advantage of trading using opposite Walmart and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Walmart 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 Walmart 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.