Correlation Between Summit Hotel and Bank of America
Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Bank of America 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 Bank of America 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 Bank of America, you can compare the effects of market volatilities on Summit Hotel and Bank of America 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 Bank of America. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Bank of America.
Diversification Opportunities for Summit Hotel and Bank of America
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Summit and Bank is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of America 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 Bank of America. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of America has no effect on the direction of Summit Hotel i.e., Summit Hotel and Bank of America go up and down completely randomly.
Pair Corralation between Summit Hotel and Bank of America
Considering the 90-day investment horizon Summit Hotel Properties is expected to generate 2.98 times more return on investment than Bank of America. However, Summit Hotel is 2.98 times more volatile than Bank of America. It trades about 0.02 of its potential returns per unit of risk. Bank of America is currently generating about 0.06 per unit of risk. If you would invest 633.00 in Summit Hotel Properties on November 5, 2024 and sell it today you would earn a total of 38.00 from holding Summit Hotel Properties or generate 6.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Hotel Properties vs. Bank of America
Performance |
| Timeline |
| Summit Hotel Properties |
| Bank of America |
Summit Hotel and Bank of America Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Hotel and Bank of America
The main advantage of trading using opposite Summit Hotel and Bank of America positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Bank of America 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 Bank of America will offset losses from the drop in Bank of America's long position.| Summit Hotel vs. Diamondrock Hospitality | Summit Hotel vs. RLJ Lodging Trust | Summit Hotel vs. Pebblebrook Hotel Trust | Summit Hotel vs. Sunstone Hotel Investors |
| Bank of America vs. Encore Capital Group | Bank of America vs. Canaf Investments | Bank of America vs. SEI Investments | Bank of America vs. Bankwell Financial Group |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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