Correlation Between Constellation Software and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Constellation Software 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 Constellation Software and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Constellation Software and Summit Hotel Properties, you can compare the effects of market volatilities on Constellation Software 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 Constellation Software with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Constellation Software and Summit Hotel.
Diversification Opportunities for Constellation Software and Summit Hotel
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Constellation and Summit is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Software 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 Constellation Software 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 Constellation Software 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 Constellation Software i.e., Constellation Software and Summit Hotel go up and down completely randomly.
Pair Corralation between Constellation Software and Summit Hotel
Assuming the 90 days trading horizon Constellation Software is expected to generate 0.61 times more return on investment than Summit Hotel. However, Constellation Software is 1.64 times less risky than Summit Hotel. It trades about 0.13 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.02 per unit of risk. If you would invest 143,435 in Constellation Software on September 12, 2024 and sell it today you would earn a total of 172,565 from holding Constellation Software or generate 120.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Constellation Software vs. Summit Hotel Properties
Performance |
| Timeline |
| Constellation Software |
| Summit Hotel Properties |
Constellation Software and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Constellation Software and Summit Hotel
The main advantage of trading using opposite Constellation Software and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Constellation Software 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.| Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc | Constellation Software vs. Apple Inc |
| Summit Hotel vs. Host Hotels Resorts | Summit Hotel vs. Sunstone Hotel Investors | Summit Hotel vs. Xenia Hotels Resorts | Summit Hotel vs. ASHFORD HOSPITTRUST |
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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.
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