Correlation Between Small Cap and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and Summit Hotel Properties, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Summit Hotel.
Diversification Opportunities for Small Cap and Summit Hotel
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Small and Summit is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium 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 Small Cap 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 Small Cap Premium 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 Small Cap i.e., Small Cap and Summit Hotel go up and down completely randomly.
Pair Corralation between Small Cap and Summit Hotel
Considering the 90-day investment horizon Small Cap is expected to generate 1.66 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, Small Cap Premium is 3.86 times less risky than Summit Hotel. It trades about 0.08 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 587.00 in Summit Hotel Properties on September 1, 2024 and sell it today you would earn a total of 71.00 from holding Summit Hotel Properties or generate 12.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Premium vs. Summit Hotel Properties
Performance |
| Timeline |
| Small Cap Premium |
| Summit Hotel Properties |
Small Cap and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Summit Hotel
The main advantage of trading using opposite Small Cap and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
| 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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