Correlation Between Dairy Farm and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Dairy Farm 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 Dairy Farm and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dairy Farm International and Summit Hotel Properties, you can compare the effects of market volatilities on Dairy Farm 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 Dairy Farm with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dairy Farm and Summit Hotel.
Diversification Opportunities for Dairy Farm and Summit Hotel
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between Dairy and Summit is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Dairy Farm International 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 Dairy Farm 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 Dairy Farm International 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 Dairy Farm i.e., Dairy Farm and Summit Hotel go up and down completely randomly.
Pair Corralation between Dairy Farm and Summit Hotel
Assuming the 90 days trading horizon Dairy Farm International is expected to generate 1.46 times more return on investment than Summit Hotel. However, Dairy Farm is 1.46 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 0.04 per unit of risk. If you would invest 187.00 in Dairy Farm International on September 20, 2024 and sell it today you would earn a total of 27.00 from holding Dairy Farm International or generate 14.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dairy Farm International vs. Summit Hotel Properties
Performance |
| Timeline |
| Dairy Farm International |
| Summit Hotel Properties |
Dairy Farm and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dairy Farm and Summit Hotel
The main advantage of trading using opposite Dairy Farm and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dairy Farm 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.| Dairy Farm vs. Loblaw Companies Limited | Dairy Farm vs. Superior Plus Corp | Dairy Farm vs. SIVERS SEMICONDUCTORS AB | Dairy Farm vs. Norsk Hydro ASA |
| Summit Hotel vs. Titan Machinery | Summit Hotel vs. Sterling Construction | Summit Hotel vs. Hanison Construction Holdings | Summit Hotel vs. Dairy Farm International |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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