Correlation Between Summit Hotel and Walmart

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

Diversification Opportunities for Summit Hotel and Walmart

0.55

Correlation Coefficient

Summit Hotel  Walmart

Very weak diversification

The 3 months correlation between Summit and Walmart is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Summit Hotel i.e., Summit Hotel and Walmart go up and down completely randomly.

Pair Corralation between Summit Hotel and Walmart

Assuming the 90 days horizon Summit Hotel is expected to generate 5.4 times less return on investment than Walmart. In addition to that, Summit Hotel is 1.77 times more volatile than Walmart. It trades about 0.01 of its total potential returns per unit of risk. Walmart is currently generating about 0.14 per unit of volatility. If you would invest  4,305  in Walmart on September 20, 2024 and sell it today you would earn a total of  4,876  from holding Walmart or generate 113.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Summit Hotel Properties  vs.  Walmart

Summit Hotel Properties

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Summit Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Walmart

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and Walmart

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

The idea behind Summit Hotel Properties and Walmart 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.