Correlation Between Summit Hotel and Darden Restaurants
Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Darden Restaurants 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 Darden Restaurants 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 Darden Restaurants, you can compare the effects of market volatilities on Summit Hotel and Darden Restaurants 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 Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Darden Restaurants.
Diversification Opportunities for Summit Hotel and Darden Restaurants
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Summit and Darden is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants 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 Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Summit Hotel i.e., Summit Hotel and Darden Restaurants go up and down completely randomly.
Pair Corralation between Summit Hotel and Darden Restaurants
Assuming the 90 days horizon Summit Hotel is expected to generate 1.33 times less return on investment than Darden Restaurants. In addition to that, Summit Hotel is 1.29 times more volatile than Darden Restaurants. It trades about 0.06 of its total potential returns per unit of risk. Darden Restaurants is currently generating about 0.1 per unit of volatility. If you would invest 13,553 in Darden Restaurants on September 3, 2024 and sell it today you would earn a total of 2,892 from holding Darden Restaurants or generate 21.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Hotel Properties vs. Darden Restaurants
Performance |
| Timeline |
| Summit Hotel Properties |
| Darden Restaurants |
Summit Hotel and Darden Restaurants Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Hotel and Darden Restaurants
The main advantage of trading using opposite Summit Hotel and Darden Restaurants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Darden Restaurants 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 Darden Restaurants will offset losses from the drop in Darden Restaurants' long position.| Summit Hotel vs. PSI Software AG | Summit Hotel vs. Cogent Communications Holdings | Summit Hotel vs. CyberArk Software | Summit Hotel vs. INTERSHOP Communications Aktiengesellschaft |
| Darden Restaurants vs. BII Railway Transportation | Darden Restaurants vs. Chesapeake Utilities | Darden Restaurants vs. Gaztransport Technigaz SA | Darden Restaurants vs. TITANIUM TRANSPORTGROUP |
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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