Correlation Between CF Industries and Summit Hotel

Can any of the company-specific risk be diversified away by investing in both CF Industries 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 CF Industries and Summit Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CF Industries Holdings and Summit Hotel Properties, you can compare the effects of market volatilities on CF Industries 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 CF Industries with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Industries and Summit Hotel.

Diversification Opportunities for CF Industries and Summit Hotel

0.38

Correlation Coefficient

CF Industries  Summit Hotel

Weak diversification

The 3 months correlation between CF Industries and Summit is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding CF Industries Holdings 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 CF Industries 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 CF Industries Holdings 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 CF Industries i.e., CF Industries and Summit Hotel go up and down completely randomly.

Pair Corralation between CF Industries and Summit Hotel

Allowing for the 90-day total investment horizon CF Industries is expected to generate 8.29 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, CF Industries Holdings is 1.32 times less risky than Summit Hotel. It trades about 0.01 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  677.00  in Summit Hotel Properties on September 29, 2024 and sell it today you would earn a total of  19.00  from holding Summit Hotel Properties or generate 2.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

CF Industries Holdings  vs.  Summit Hotel Properties

CF Industries Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CF Industries Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, CF Industries is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Summit Hotel Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with CF Industries and Summit Hotel

The main advantage of trading using opposite CF Industries and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Industries 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.

The idea behind CF Industries Holdings and Summit Hotel Properties pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.