Correlation Between Summit Hotel and ABB
Can any of the company-specific risk be diversified away by investing in both Summit Hotel and ABB 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 ABB 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 ABB, you can compare the effects of market volatilities on Summit Hotel and ABB 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 ABB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and ABB.
Diversification Opportunities for Summit Hotel and ABB
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Summit and ABB is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and ABB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABB 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 ABB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABB has no effect on the direction of Summit Hotel i.e., Summit Hotel and ABB go up and down completely randomly.
Pair Corralation between Summit Hotel and ABB
Assuming the 90 days horizon Summit Hotel Properties is expected to under-perform the ABB. In addition to that, Summit Hotel is 1.04 times more volatile than ABB. It trades about -0.12 of its total potential returns per unit of risk. ABB is currently generating about 0.03 per unit of volatility. If you would invest 5,250 in ABB on December 1, 2024 and sell it today you would earn a total of 50.00 from holding ABB or generate 0.95% 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. ABB
Performance |
| Timeline |
| Summit Hotel Properties |
| ABB |
Summit Hotel and ABB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Hotel and ABB
The main advantage of trading using opposite Summit Hotel and ABB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, ABB 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 ABB will offset losses from the drop in ABB's long position.| Summit Hotel vs. Sumitomo Mitsui Construction | Summit Hotel vs. Sims Metal Management | Summit Hotel vs. Titan Machinery | Summit Hotel vs. Sterling Construction |
| ABB vs. COMPUTER MODELLING | ABB vs. COMPUTERSHARE | ABB vs. INTERSHOP Communications Aktiengesellschaft | ABB vs. China Communications Construction |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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