Correlation Between Summit Hotel and PACCAR

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

Diversification Opportunities for Summit Hotel and PACCAR

-0.05

Correlation Coefficient

Summit Hotel  PACCAR

Good diversification

The 3 months correlation between Summit and PACCAR is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of Summit Hotel i.e., Summit Hotel and PACCAR go up and down completely randomly.

Pair Corralation between Summit Hotel and PACCAR

Considering the 90-day investment horizon Summit Hotel is expected to generate 6.75 times less return on investment than PACCAR. In addition to that, Summit Hotel is 1.14 times more volatile than PACCAR Inc. It trades about 0.01 of its total potential returns per unit of risk. PACCAR Inc is currently generating about 0.09 per unit of volatility. If you would invest  9,568  in PACCAR Inc on September 28, 2024 and sell it today you would earn a total of  870.00  from holding PACCAR Inc or generate 9.09% 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.  PACCAR Inc

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.

PACCAR Inc

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PACCAR Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, PACCAR may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Summit Hotel and PACCAR

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

The idea behind Summit Hotel Properties and PACCAR Inc 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.