Correlation Between AIR PRODCHEMICALS and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both AIR PRODCHEMICALS and Sunstone 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 AIR PRODCHEMICALS and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AIR PRODCHEMICALS and Sunstone Hotel Investors, you can compare the effects of market volatilities on AIR PRODCHEMICALS and Sunstone 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 AIR PRODCHEMICALS with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of AIR PRODCHEMICALS and Sunstone Hotel.
Diversification Opportunities for AIR PRODCHEMICALS and Sunstone Hotel
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AIR and Sunstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AIR PRODCHEMICALS and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors and AIR PRODCHEMICALS 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 AIR PRODCHEMICALS are associated (or correlated) with Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of AIR PRODCHEMICALS i.e., AIR PRODCHEMICALS and Sunstone Hotel go up and down completely randomly.
Pair Corralation between AIR PRODCHEMICALS and Sunstone Hotel
Assuming the 90 days trading horizon AIR PRODCHEMICALS is expected to generate 0.51 times more return on investment than Sunstone Hotel. However, AIR PRODCHEMICALS is 1.97 times less risky than Sunstone Hotel. It trades about 0.42 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.18 per unit of risk. If you would invest 28,740 in AIR PRODCHEMICALS on September 1, 2024 and sell it today you would earn a total of 2,890 from holding AIR PRODCHEMICALS or generate 10.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AIR PRODCHEMICALS vs. Sunstone Hotel Investors
Performance |
| Timeline |
| AIR PRODCHEMICALS |
| Sunstone Hotel Investors |
AIR PRODCHEMICALS and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AIR PRODCHEMICALS and Sunstone Hotel
The main advantage of trading using opposite AIR PRODCHEMICALS and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AIR PRODCHEMICALS position performs unexpectedly, Sunstone 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 Sunstone Hotel will offset losses from the drop in Sunstone Hotel's long position.| AIR PRODCHEMICALS vs. SIVERS SEMICONDUCTORS AB | AIR PRODCHEMICALS vs. Darden Restaurants | AIR PRODCHEMICALS vs. Reliance Steel Aluminum | AIR PRODCHEMICALS vs. Q2M Managementberatung AG |
| Sunstone Hotel vs. Federal Agricultural Mortgage | Sunstone Hotel vs. THAI BEVERAGE | Sunstone Hotel vs. Monster Beverage Corp | Sunstone Hotel vs. Australian Agricultural |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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