Correlation Between Montauk Renewables and Summit Hotel

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

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

Diversification Opportunities for Montauk Renewables and Summit Hotel

-0.34

Correlation Coefficient

Montauk Renewables  Summit Hotel

Very good diversification

The 3 months correlation between Montauk and Summit is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Summit Hotel go up and down completely randomly.

Pair Corralation between Montauk Renewables and Summit Hotel

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Summit Hotel. In addition to that, Montauk Renewables is 1.98 times more volatile than Summit Hotel Properties. It trades about -0.1 of its total potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.01 per unit of volatility. If you would invest  684.00  in Summit Hotel Properties on September 26, 2024 and sell it today you would lose (3.00) from holding Summit Hotel Properties or give up 0.44% of portfolio value over 90 days.

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

Montauk Renewables  vs.  Summit Hotel Properties

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

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.

Pair Trading with Montauk Renewables and Summit Hotel

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

The idea behind Montauk Renewables and Summit Hotel Properties 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.