Correlation Between Summit Hotel and Stepstone

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

Diversification Opportunities for Summit Hotel and Stepstone

-0.14

Correlation Coefficient

Summit Hotel  Stepstone

Good diversification

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

Pair Corralation between Summit Hotel and Stepstone

Considering the 90-day investment horizon Summit Hotel is expected to generate 1.75 times less return on investment than Stepstone. But when comparing it to its historical volatility, Summit Hotel Properties is 1.05 times less risky than Stepstone. It trades about 0.07 of its potential returns per unit of risk. Stepstone Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  5,352  in Stepstone Group on September 5, 2024 and sell it today you would earn a total of  933.00  from holding Stepstone Group or generate 17.43% 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.  Stepstone Group

Summit Hotel Properties

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Summit Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Stepstone Group

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stepstone Group are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile technical and fundamental indicators, Stepstone reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and Stepstone

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

The idea behind Summit Hotel Properties and Stepstone Group 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.