Correlation Between Summit Hotel and China Yongda

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

Diversification Opportunities for Summit Hotel and China Yongda

-0.44

Correlation Coefficient

Summit Hotel  China Yongda

Very good diversification

The 3 months correlation between Summit and China is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Summit Hotel Properties and China Yongda Automobiles in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Yongda Automobiles 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 China Yongda. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Yongda Automobiles has no effect on the direction of Summit Hotel i.e., Summit Hotel and China Yongda go up and down completely randomly.

Pair Corralation between Summit Hotel and China Yongda

Assuming the 90 days horizon Summit Hotel Properties is expected to generate 0.63 times more return on investment than China Yongda. However, Summit Hotel Properties is 1.58 times less risky than China Yongda. It trades about 0.2 of its potential returns per unit of risk. China Yongda Automobiles is currently generating about 0.01 per unit of risk. If you would invest  338.00  in Summit Hotel Properties on April 25, 2025 and sell it today you would earn a total of  136.00  from holding Summit Hotel Properties or generate 40.24% return on investment over 90 days.

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

Summit Hotel Properties  vs.  China Yongda Automobiles

Summit Hotel Properties

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Hotel Properties are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Summit Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

China Yongda Automobiles

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Yongda Automobiles has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Yongda is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Summit Hotel and China Yongda

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

The idea behind Summit Hotel Properties and China Yongda Automobiles 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.