Correlation Between CDN IMPERIAL and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both CDN IMPERIAL 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 CDN IMPERIAL and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CDN IMPERIAL BANK and Sunstone Hotel Investors, you can compare the effects of market volatilities on CDN IMPERIAL 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 CDN IMPERIAL with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of CDN IMPERIAL and Sunstone Hotel.
Diversification Opportunities for CDN IMPERIAL and Sunstone Hotel
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CDN and Sunstone is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding CDN IMPERIAL BANK 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 CDN IMPERIAL 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 CDN IMPERIAL BANK 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 CDN IMPERIAL i.e., CDN IMPERIAL and Sunstone Hotel go up and down completely randomly.
Pair Corralation between CDN IMPERIAL and Sunstone Hotel
Assuming the 90 days trading horizon CDN IMPERIAL BANK is expected to generate 0.74 times more return on investment than Sunstone Hotel. However, CDN IMPERIAL BANK is 1.36 times less risky than Sunstone Hotel. It trades about 0.14 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.04 per unit of risk. If you would invest 3,903 in CDN IMPERIAL BANK on November 9, 2024 and sell it today you would earn a total of 2,058 from holding CDN IMPERIAL BANK or generate 52.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CDN IMPERIAL BANK vs. Sunstone Hotel Investors
Performance |
| Timeline |
| CDN IMPERIAL BANK |
| Sunstone Hotel Investors |
CDN IMPERIAL and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CDN IMPERIAL and Sunstone Hotel
The main advantage of trading using opposite CDN IMPERIAL and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CDN IMPERIAL 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.| CDN IMPERIAL vs. Tencent Music Entertainment | CDN IMPERIAL vs. THAI BEVERAGE | CDN IMPERIAL vs. Reinsurance Group of | CDN IMPERIAL vs. VIENNA INSURANCE GR |
| Sunstone Hotel vs. Host Hotels Resorts | Sunstone Hotel vs. Ryman Hospitality Properties | Sunstone Hotel vs. Park Hotels Resorts | Sunstone Hotel vs. Pebblebrook Hotel Trust |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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