Correlation Between Compania Cervecerias and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Compania Cervecerias 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 Compania Cervecerias and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Compania Cervecerias Unidas and Summit Hotel Properties, you can compare the effects of market volatilities on Compania Cervecerias 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 Compania Cervecerias with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Compania Cervecerias and Summit Hotel.
Diversification Opportunities for Compania Cervecerias and Summit Hotel
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Compania and Summit is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Compania Cervecerias Unidas 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 Compania Cervecerias 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 Compania Cervecerias Unidas 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 Compania Cervecerias i.e., Compania Cervecerias and Summit Hotel go up and down completely randomly.
Pair Corralation between Compania Cervecerias and Summit Hotel
Considering the 90-day investment horizon Compania Cervecerias is expected to generate 1.58 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, Compania Cervecerias Unidas is 1.42 times less risky than Summit Hotel. It trades about 0.17 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 604.00 in Summit Hotel Properties on September 1, 2024 and sell it today you would earn a total of 54.00 from holding Summit Hotel Properties or generate 8.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Compania Cervecerias Unidas vs. Summit Hotel Properties
Performance |
| Timeline |
| Compania Cervecerias |
| Summit Hotel Properties |
Compania Cervecerias and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Compania Cervecerias and Summit Hotel
The main advantage of trading using opposite Compania Cervecerias and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Compania Cervecerias 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.| Compania Cervecerias vs. Boston Beer | Compania Cervecerias vs. Molson Coors Beverage | Compania Cervecerias vs. Ambev SA ADR | Compania Cervecerias vs. Molson Coors Brewing |
| Summit Hotel vs. Diamondrock Hospitality | Summit Hotel vs. Ryman Hospitality Properties | Summit Hotel vs. Service Properties Trust | Summit Hotel vs. RLJ Lodging Trust |
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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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