Correlation Between Summit Hotel and Transcontinental

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

Diversification Opportunities for Summit Hotel and Transcontinental

0.54

Correlation Coefficient

Summit Hotel  Transcontinental

Very weak diversification

The 3 months correlation between Summit and Transcontinental is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Transcontinental Realty Invest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcontinental Realty 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 Transcontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcontinental Realty has no effect on the direction of Summit Hotel i.e., Summit Hotel and Transcontinental go up and down completely randomly.

Pair Corralation between Summit Hotel and Transcontinental

Considering the 90-day investment horizon Summit Hotel is expected to generate 2.55 times less return on investment than Transcontinental. In addition to that, Summit Hotel is 1.06 times more volatile than Transcontinental Realty Investors. It trades about 0.02 of its total potential returns per unit of risk. Transcontinental Realty Investors is currently generating about 0.05 per unit of volatility. If you would invest  2,902  in Transcontinental Realty Investors on July 11, 2025 and sell it today you would earn a total of  1,581  from holding Transcontinental Realty Investors or generate 54.48% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Transcontinental Realty Invest

Summit Hotel Properties

Risk-Adjusted Performance

Weakest

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

Transcontinental Realty

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Transcontinental Realty Investors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Transcontinental is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Summit Hotel and Transcontinental

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

The idea behind Summit Hotel Properties and Transcontinental Realty Investors 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.