Correlation Between Summit Hotel and Ryman Hospitality

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

Diversification Opportunities for Summit Hotel and Ryman Hospitality

0.55

Correlation Coefficient

Summit Hotel  Ryman Hospitality

Very weak diversification

The 3 months correlation between Summit and Ryman is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and Ryman Hospitality Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ryman Hospitality 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 Ryman Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ryman Hospitality has no effect on the direction of Summit Hotel i.e., Summit Hotel and Ryman Hospitality go up and down completely randomly.

Pair Corralation between Summit Hotel and Ryman Hospitality

Assuming the 90 days horizon Summit Hotel is expected to generate 1.66 times less return on investment than Ryman Hospitality. In addition to that, Summit Hotel is 1.63 times more volatile than Ryman Hospitality Properties. It trades about 0.09 of its total potential returns per unit of risk. Ryman Hospitality Properties is currently generating about 0.25 per unit of volatility. If you would invest  8,898  in Ryman Hospitality Properties on September 12, 2024 and sell it today you would earn a total of  2,202  from holding Ryman Hospitality Properties or generate 24.75% return on investment over 90 days.

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

Summit Hotel Properties  vs.  Ryman Hospitality Properties

Summit Hotel Properties

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Summit Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Ryman Hospitality

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ryman Hospitality Properties are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Ryman Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and Ryman Hospitality

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

The idea behind Summit Hotel Properties and Ryman Hospitality 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.