Correlation Between Sparta Capital and Summit Hotel

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

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

Diversification Opportunities for Sparta Capital and Summit Hotel

-0.3

Correlation Coefficient

Sparta Capital  Summit Hotel

Very good diversification

The 3 months correlation between Sparta and Summit is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sparta Capital 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 Sparta Capital 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 Sparta Capital 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 Sparta Capital i.e., Sparta Capital and Summit Hotel go up and down completely randomly.

Pair Corralation between Sparta Capital and Summit Hotel

Assuming the 90 days horizon Sparta Capital is expected to under-perform the Summit Hotel. In addition to that, Sparta Capital is 4.08 times more volatile than Summit Hotel Properties. It trades about -0.13 of its total potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.04 per unit of volatility. If you would invest  2,067  in Summit Hotel Properties on September 12, 2024 and sell it today you would earn a total of  38.00  from holding Summit Hotel Properties or generate 1.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Sparta Capital  vs.  Summit Hotel Properties

Sparta Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sparta Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Summit Hotel Properties

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Summit Hotel is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sparta Capital and Summit Hotel

The main advantage of trading using opposite Sparta Capital and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sparta Capital 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 Sparta Capital 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.