Correlation Between MidCap Financial and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both MidCap Financial 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 MidCap Financial and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MidCap Financial Investment and Summit Hotel Properties, you can compare the effects of market volatilities on MidCap Financial 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 MidCap Financial with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MidCap Financial and Summit Hotel.
Diversification Opportunities for MidCap Financial and Summit Hotel
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MidCap and Summit is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding MidCap Financial Investment 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 MidCap Financial 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 MidCap Financial Investment 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 MidCap Financial i.e., MidCap Financial and Summit Hotel go up and down completely randomly.
Pair Corralation between MidCap Financial and Summit Hotel
Assuming the 90 days trading horizon MidCap Financial Investment is expected to generate 0.74 times more return on investment than Summit Hotel. However, MidCap Financial Investment is 1.35 times less risky than Summit Hotel. It trades about 0.06 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.04 per unit of risk. If you would invest 1,285 in MidCap Financial Investment on October 17, 2024 and sell it today you would earn a total of 14.00 from holding MidCap Financial Investment or generate 1.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MidCap Financial Investment vs. Summit Hotel Properties
Performance |
| Timeline |
| MidCap Financial Inv |
| Summit Hotel Properties |
MidCap Financial and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MidCap Financial and Summit Hotel
The main advantage of trading using opposite MidCap Financial and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MidCap Financial 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.| MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc | MidCap Financial vs. Apple Inc |
| Summit Hotel vs. MidCap Financial Investment | Summit Hotel vs. FUYO GENERAL LEASE | Summit Hotel vs. FIRST SHIP LEASE | Summit Hotel vs. United Rentals |
Check out your portfolio center.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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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