Correlation Between Healthcare Trust and Summit Hotel

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

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

Diversification Opportunities for Healthcare Trust and Summit Hotel

-0.13

Correlation Coefficient

Healthcare Trust  Summit Hotel

Good diversification

The 3 months correlation between Healthcare and Summit is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Healthcare Trust PR 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 Healthcare Trust 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 Healthcare Trust PR 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 Healthcare Trust i.e., Healthcare Trust and Summit Hotel go up and down completely randomly.

Pair Corralation between Healthcare Trust and Summit Hotel

Given the investment horizon of 90 days Healthcare Trust PR is expected to under-perform the Summit Hotel. In addition to that, Healthcare Trust is 1.97 times more volatile than Summit Hotel Properties. It trades about -0.09 of its total potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.13 per unit of volatility. If you would invest  2,071  in Summit Hotel Properties on September 13, 2024 and sell it today you would earn a total of  34.00  from holding Summit Hotel Properties or generate 1.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Healthcare Trust PR  vs.  Summit Hotel Properties

Healthcare Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Healthcare Trust PR are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward indicators, Healthcare Trust is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 rather sound basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Healthcare Trust and Summit Hotel

The main advantage of trading using opposite Healthcare Trust and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Healthcare Trust 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 Healthcare Trust PR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.