Correlation Between Sterling Construction and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Sterling Construction 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 Sterling Construction and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sterling Construction and Summit Hotel Properties, you can compare the effects of market volatilities on Sterling Construction 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 Sterling Construction with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sterling Construction and Summit Hotel.
Diversification Opportunities for Sterling Construction and Summit Hotel
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Sterling and Summit is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Sterling Construction 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 Sterling Construction 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 Sterling Construction 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 Sterling Construction i.e., Sterling Construction and Summit Hotel go up and down completely randomly.
Pair Corralation between Sterling Construction and Summit Hotel
Assuming the 90 days horizon Sterling Construction is expected to generate 1.77 times more return on investment than Summit Hotel. However, Sterling Construction is 1.77 times more volatile than Summit Hotel Properties. It trades about 0.11 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.04 per unit of risk. If you would invest 7,900 in Sterling Construction on September 20, 2024 and sell it today you would earn a total of 8,910 from holding Sterling Construction or generate 112.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sterling Construction vs. Summit Hotel Properties
Performance |
| Timeline |
| Sterling Construction |
| Summit Hotel Properties |
Sterling Construction and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sterling Construction and Summit Hotel
The main advantage of trading using opposite Sterling Construction and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sterling Construction 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.| Sterling Construction vs. MELIA HOTELS | Sterling Construction vs. CDL INVESTMENT | Sterling Construction vs. Host Hotels Resorts | Sterling Construction vs. InterContinental Hotels Group |
| Summit Hotel vs. Titan Machinery | Summit Hotel vs. Sterling Construction | Summit Hotel vs. Hanison Construction Holdings | Summit Hotel vs. Dairy Farm International |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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