Correlation Between First Industrial and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both First Industrial 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 First Industrial and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Industrial Realty and Sunstone Hotel Investors, you can compare the effects of market volatilities on First Industrial 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 First Industrial with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Industrial and Sunstone Hotel.
Diversification Opportunities for First Industrial and Sunstone Hotel
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and Sunstone is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Industrial Realty 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 First Industrial 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 First Industrial Realty 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 First Industrial i.e., First Industrial and Sunstone Hotel go up and down completely randomly.
Pair Corralation between First Industrial and Sunstone Hotel
Allowing for the 90-day total investment horizon First Industrial Realty is expected to generate 1.19 times more return on investment than Sunstone Hotel. However, First Industrial is 1.19 times more volatile than Sunstone Hotel Investors. It trades about 0.22 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about -0.05 per unit of risk. If you would invest 4,948 in First Industrial Realty on November 2, 2024 and sell it today you would earn a total of 334.00 from holding First Industrial Realty or generate 6.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Industrial Realty vs. Sunstone Hotel Investors
Performance |
| Timeline |
| First Industrial Realty |
| Sunstone Hotel Investors |
First Industrial and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Industrial and Sunstone Hotel
The main advantage of trading using opposite First Industrial and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Industrial 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.| First Industrial vs. LXP Industrial Trust | First Industrial vs. Plymouth Industrial REIT | First Industrial vs. Global Self Storage | First Industrial vs. Terreno Realty |
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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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