Correlation Between Summit Hotel and Shake Shack
Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Shake Shack 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 Shake Shack 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 Shake Shack, you can compare the effects of market volatilities on Summit Hotel and Shake Shack 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 Shake Shack. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Shake Shack.
Diversification Opportunities for Summit Hotel and Shake Shack
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and Shake is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Shake Shack in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shake Shack 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 Shake Shack. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shake Shack has no effect on the direction of Summit Hotel i.e., Summit Hotel and Shake Shack go up and down completely randomly.
Pair Corralation between Summit Hotel and Shake Shack
Considering the 90-day investment horizon Summit Hotel is expected to generate 56.55 times less return on investment than Shake Shack. But when comparing it to its historical volatility, Summit Hotel Properties is 1.36 times less risky than Shake Shack. It trades about 0.0 of its potential returns per unit of risk. Shake Shack is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 4,831 in Shake Shack on August 28, 2024 and sell it today you would earn a total of 8,111 from holding Shake Shack or generate 167.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Hotel Properties vs. Shake Shack
Performance |
| Timeline |
| Summit Hotel Properties |
| Shake Shack |
Summit Hotel and Shake Shack Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Hotel and Shake Shack
The main advantage of trading using opposite Summit Hotel and Shake Shack positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Shake Shack 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 Shake Shack will offset losses from the drop in Shake Shack'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 |
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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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