Correlation Between NETGEAR and Summit Hotel

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

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

Diversification Opportunities for NETGEAR and Summit Hotel

0.07

Correlation Coefficient

NETGEAR  Summit Hotel

Significant diversification

The 3 months correlation between NETGEAR and Summit is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding NETGEAR 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 NETGEAR 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 NETGEAR 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 NETGEAR i.e., NETGEAR and Summit Hotel go up and down completely randomly.

Pair Corralation between NETGEAR and Summit Hotel

Given the investment horizon of 90 days NETGEAR is expected to generate 1.14 times more return on investment than Summit Hotel. However, NETGEAR is 1.14 times more volatile than Summit Hotel Properties. It trades about 0.24 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.02 per unit of risk. If you would invest  2,017  in NETGEAR on September 25, 2024 and sell it today you would earn a total of  783.00  from holding NETGEAR or generate 38.82% return on investment over 90 days.

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

NETGEAR  vs.  Summit Hotel Properties

NETGEAR

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NETGEAR are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, NETGEAR reported solid returns over the last few months and may actually be approaching a breakup point.

Summit Hotel Properties

Risk-Adjusted Performance

1 of 100

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 current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NETGEAR and Summit Hotel

The main advantage of trading using opposite NETGEAR and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NETGEAR 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 NETGEAR 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.

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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.