Correlation Between Take Two and Summit Hotel

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

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

Diversification Opportunities for Take Two and Summit Hotel

0.26

Correlation Coefficient

Take Two  Summit Hotel

Modest diversification

The 3 months correlation between Take and Summit is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Take Two Interactive Software 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 Take Two 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 Take Two Interactive Software 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 Take Two i.e., Take Two and Summit Hotel go up and down completely randomly.

Pair Corralation between Take Two and Summit Hotel

Given the investment horizon of 90 days Take Two is expected to generate 4.41 times less return on investment than Summit Hotel. But when comparing it to its historical volatility, Take Two Interactive Software is 1.1 times less risky than Summit Hotel. It trades about 0.03 of its potential returns per unit of risk. Summit Hotel Properties is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  626.00  in Summit Hotel Properties on July 1, 2024 and sell it today you would earn a total of  61.00  from holding Summit Hotel Properties or generate 9.74% return on investment over 90 days.

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

Take Two Interactive Software  vs.  Summit Hotel Properties

Take Two Interactive

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Take Two Interactive Software has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Take Two is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Summit Hotel Properties

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Summit Hotel displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Take Two and Summit Hotel

The main advantage of trading using opposite Take Two and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Take Two 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 Take Two Interactive Software 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.