Correlation Between Visa and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Visa 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 Visa and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Visa Class A and Summit Hotel Properties, you can compare the effects of market volatilities on Visa 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 Visa with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and Summit Hotel.
Diversification Opportunities for Visa and Summit Hotel
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Visa and Summit is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A 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 Visa 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 Visa Class A 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 Visa i.e., Visa and Summit Hotel go up and down completely randomly.
Pair Corralation between Visa and Summit Hotel
Taking into account the 90-day investment horizon Visa is expected to generate 1.36 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, Visa Class A is 2.22 times less risky than Summit Hotel. It trades about 0.35 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 543.00 in Summit Hotel Properties on September 1, 2024 and sell it today you would earn a total of 67.00 from holding Summit Hotel Properties or generate 12.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Visa Class A vs. Summit Hotel Properties
Performance |
| Timeline |
| Visa Class A |
| Summit Hotel Properties |
Visa and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Visa and Summit Hotel
The main advantage of trading using opposite Visa and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Visa 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.| Visa vs. American Express | Visa vs. PayPal Holdings | Visa vs. Capital One Financial | Visa vs. Upstart Holdings |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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