Correlation Between Group Ten and Summit Hotel

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

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

Diversification Opportunities for Group Ten and Summit Hotel

0.06

Correlation Coefficient

Group Ten  Summit Hotel

Significant diversification

The 3 months correlation between Group and Summit is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Group Ten Metals 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 Group Ten 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 Group Ten Metals 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 Group Ten i.e., Group Ten and Summit Hotel go up and down completely randomly.

Pair Corralation between Group Ten and Summit Hotel

Assuming the 90 days horizon Group Ten Metals is expected to generate 3.58 times more return on investment than Summit Hotel. However, Group Ten is 3.58 times more volatile than Summit Hotel Properties. It trades about 0.03 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about -0.14 per unit of risk. If you would invest  11.00  in Group Ten Metals on January 30, 2024 and sell it today you would earn a total of  0.00  from holding Group Ten Metals or generate 0.0% return on investment over 90 days.

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

Group Ten Metals  vs.  Summit Hotel Properties

Group Ten Metals

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Group Ten Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Group Ten may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Group Ten and Summit Hotel

The main advantage of trading using opposite Group Ten and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Group Ten 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 Group Ten Metals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.