Correlation Between Summit Hotel and Ashford Hospitality

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

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

Diversification Opportunities for Summit Hotel and Ashford Hospitality

-0.3

Correlation Coefficient

Summit Hotel  Ashford Hospitality

Very good diversification

The 3 months correlation between Summit and Ashford is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Ashford Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashford Hospitality Trust and Summit Hotel 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 Summit Hotel Properties are associated (or correlated) with Ashford Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashford Hospitality Trust has no effect on the direction of Summit Hotel i.e., Summit Hotel and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Summit Hotel and Ashford Hospitality

Assuming the 90 days trading horizon Summit Hotel is expected to generate 2.26 times less return on investment than Ashford Hospitality. But when comparing it to its historical volatility, Summit Hotel Properties is 3.44 times less risky than Ashford Hospitality. It trades about 0.05 of its potential returns per unit of risk. Ashford Hospitality Trust is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,148  in Ashford Hospitality Trust on September 12, 2024 and sell it today you would earn a total of  260.00  from holding Ashford Hospitality Trust or generate 22.65% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Ashford Hospitality Trust

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Ashford Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashford Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Summit Hotel and Ashford Hospitality

The main advantage of trading using opposite Summit Hotel and Ashford Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Hotel position performs unexpectedly, Ashford Hospitality 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 Ashford Hospitality will offset losses from the drop in Ashford Hospitality's long position.

The idea behind Summit Hotel Properties and Ashford Hospitality Trust 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.