Correlation Between Summit Hotel and SEI Investments

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

Diversification Opportunities for Summit Hotel and SEI Investments

0.14

Correlation Coefficient

Summit Hotel  SEI Investments

Average diversification

The 3 months correlation between Summit and SEI is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and SEI Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEI Investments 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 SEI Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEI Investments has no effect on the direction of Summit Hotel i.e., Summit Hotel and SEI Investments go up and down completely randomly.

Pair Corralation between Summit Hotel and SEI Investments

Considering the 90-day investment horizon Summit Hotel Properties is expected to generate 1.44 times more return on investment than SEI Investments. However, Summit Hotel is 1.44 times more volatile than SEI Investments. It trades about 0.1 of its potential returns per unit of risk. SEI Investments is currently generating about 0.08 per unit of risk. If you would invest  657.00  in Summit Hotel Properties on October 1, 2024 and sell it today you would earn a total of  26.00  from holding Summit Hotel Properties or generate 3.96% 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.  SEI Investments

Summit Hotel Properties

Risk-Adjusted Performance

0 of 100

Very 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.

SEI Investments

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SEI Investments are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent forward indicators, SEI Investments exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and SEI Investments

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

The idea behind Summit Hotel Properties and SEI Investments 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.

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.