Correlation Between Summit Hotel and Meiko Electronics
Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Meiko Electronics 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 Meiko Electronics 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 Meiko Electronics Co, you can compare the effects of market volatilities on Summit Hotel and Meiko Electronics 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 Meiko Electronics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Meiko Electronics.
Diversification Opportunities for Summit Hotel and Meiko Electronics
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Summit and Meiko is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Meiko Electronics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meiko Electronics 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 Meiko Electronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meiko Electronics has no effect on the direction of Summit Hotel i.e., Summit Hotel and Meiko Electronics go up and down completely randomly.
Pair Corralation between Summit Hotel and Meiko Electronics
Assuming the 90 days horizon Summit Hotel is expected to generate 2.78 times less return on investment than Meiko Electronics. But when comparing it to its historical volatility, Summit Hotel Properties is 1.77 times less risky than Meiko Electronics. It trades about 0.16 of its potential returns per unit of risk. Meiko Electronics Co is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 3,720 in Meiko Electronics Co on September 24, 2024 and sell it today you would earn a total of 1,830 from holding Meiko Electronics Co or generate 49.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Summit Hotel Properties vs. Meiko Electronics Co
Performance |
| Timeline |
| Summit Hotel Properties |
| Meiko Electronics |
Summit Hotel and Meiko Electronics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Hotel and Meiko Electronics
The main advantage of trading using opposite Summit Hotel and Meiko Electronics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Meiko Electronics 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 Meiko Electronics will offset losses from the drop in Meiko Electronics' long position.| Summit Hotel vs. ZURICH INSURANCE GROUP | Summit Hotel vs. PREMIER FOODS | Summit Hotel vs. MagnaChip Semiconductor Corp | Summit Hotel vs. JJ SNACK FOODS |
| Meiko Electronics vs. Grand Canyon Education | Meiko Electronics vs. Playa Hotels Resorts | Meiko Electronics vs. Summit Hotel Properties | Meiko Electronics vs. G8 EDUCATION |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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