Correlation Between Summit Hotel and Equinix

Can any of the company-specific risk be diversified away by investing in both Summit Hotel and Equinix 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 Equinix 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 Equinix, you can compare the effects of market volatilities on Summit Hotel and Equinix 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 Equinix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Hotel and Equinix.

Diversification Opportunities for Summit Hotel and Equinix

0.19

Correlation Coefficient

Summit Hotel  Equinix

Average diversification

The 3 months correlation between Summit and Equinix is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of Summit Hotel i.e., Summit Hotel and Equinix go up and down completely randomly.

Pair Corralation between Summit Hotel and Equinix

Considering the 90-day investment horizon Summit Hotel is expected to generate 3.11 times less return on investment than Equinix. In addition to that, Summit Hotel is 1.35 times more volatile than Equinix. It trades about 0.01 of its total potential returns per unit of risk. Equinix is currently generating about 0.06 per unit of volatility. If you would invest  63,481  in Equinix on September 26, 2024 and sell it today you would earn a total of  30,478  from holding Equinix or generate 48.01% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Equinix

Summit Hotel Properties

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 1 (%) 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.

Equinix

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Summit Hotel and Equinix

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

The idea behind Summit Hotel Properties and Equinix 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.