Correlation Between Summit Hotel and SALESFORCE INC

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

Diversification Opportunities for Summit Hotel and SALESFORCE INC

0.24

Correlation Coefficient

Summit Hotel  SALESFORCE INC

Modest diversification

The 3 months correlation between Summit and SALESFORCE is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and SALESFORCE INC CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SALESFORCE INC CDR 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 SALESFORCE INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SALESFORCE INC CDR has no effect on the direction of Summit Hotel i.e., Summit Hotel and SALESFORCE INC go up and down completely randomly.

Pair Corralation between Summit Hotel and SALESFORCE INC

Assuming the 90 days horizon Summit Hotel is expected to generate 8.66 times less return on investment than SALESFORCE INC. But when comparing it to its historical volatility, Summit Hotel Properties is 1.02 times less risky than SALESFORCE INC. It trades about 0.03 of its potential returns per unit of risk. SALESFORCE INC CDR is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,317  in SALESFORCE INC CDR on September 3, 2024 and sell it today you would earn a total of  453.00  from holding SALESFORCE INC CDR or generate 34.4% return on investment over 90 days.

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

Summit Hotel Properties  vs.  SALESFORCE INC CDR

Summit Hotel Properties

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Summit Hotel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

SALESFORCE INC CDR

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SALESFORCE INC CDR are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SALESFORCE INC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Hotel and SALESFORCE INC

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

The idea behind Summit Hotel Properties and SALESFORCE INC CDR 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.