Correlation Between Freedom Holding and Summit Hotel

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

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

Diversification Opportunities for Freedom Holding and Summit Hotel

0.16

Correlation Coefficient

Freedom Holding  Summit Hotel

Average diversification

The 3 months correlation between Freedom and Summit is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Holding Corp 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 Freedom Holding 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 Freedom Holding Corp 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 Freedom Holding i.e., Freedom Holding and Summit Hotel go up and down completely randomly.

Pair Corralation between Freedom Holding and Summit Hotel

Given the investment horizon of 90 days Freedom Holding Corp is expected to generate 0.89 times more return on investment than Summit Hotel. However, Freedom Holding Corp is 1.12 times less risky than Summit Hotel. It trades about 0.28 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.01 per unit of risk. If you would invest  9,476  in Freedom Holding Corp on September 28, 2024 and sell it today you would earn a total of  3,539  from holding Freedom Holding Corp or generate 37.35% return on investment over 90 days.

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

Freedom Holding Corp  vs.  Summit Hotel Properties

Freedom Holding Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Holding Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Freedom Holding exhibited solid returns over the last few months and may actually be approaching a breakup point.

Summit Hotel Properties

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Summit Hotel Properties has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Freedom Holding and Summit Hotel

The main advantage of trading using opposite Freedom Holding and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Holding 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 Freedom Holding Corp 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.