Correlation Between Summit Hotel and Warner Music
Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Warner Music 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 Warner Music 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 Warner Music Group, you can compare the effects of market volatilities on Summit Hotel and Warner Music 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 Warner Music. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Warner Music.
Diversification Opportunities for Summit Hotel and Warner Music
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Summit and Warner is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of Summit Hotel i.e., Summit Hotel and Warner Music go up and down completely randomly.
Pair Corralation between Summit Hotel and Warner Music
Considering the 90-day investment horizon Summit Hotel Properties is expected to generate 1.16 times more return on investment than Warner Music. However, Summit Hotel is 1.16 times more volatile than Warner Music Group. It trades about 0.03 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.02 per unit of risk. If you would invest 595.00 in Summit Hotel Properties on September 12, 2024 and sell it today you would earn a total of 94.00 from holding Summit Hotel Properties or generate 15.8% 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. Warner Music Group
Performance |
| Timeline |
| Summit Hotel Properties |
| Warner Music Group |
Summit Hotel and Warner Music Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Hotel and Warner Music
The main advantage of trading using opposite Summit Hotel and Warner Music positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Warner Music 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 Warner Music will offset losses from the drop in Warner Music'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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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