Correlation Between IMPERIAL TOBACCO and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO 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 IMPERIAL TOBACCO and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and Sunstone Hotel Investors, you can compare the effects of market volatilities on IMPERIAL TOBACCO 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 IMPERIAL TOBACCO with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Sunstone Hotel.
Diversification Opportunities for IMPERIAL TOBACCO and Sunstone Hotel
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMPERIAL and Sunstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO 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 IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Sunstone Hotel go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Sunstone Hotel
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 0.69 times more return on investment than Sunstone Hotel. However, IMPERIAL TOBACCO is 1.45 times less risky than Sunstone Hotel. It trades about 0.08 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.02 per unit of risk. If you would invest 2,064 in IMPERIAL TOBACCO on September 3, 2024 and sell it today you would earn a total of 1,015 from holding IMPERIAL TOBACCO or generate 49.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. Sunstone Hotel Investors
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| Sunstone Hotel Investors |
IMPERIAL TOBACCO and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Sunstone Hotel
The main advantage of trading using opposite IMPERIAL TOBACCO and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO 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.| IMPERIAL TOBACCO vs. Gamma Communications plc | IMPERIAL TOBACCO vs. WisdomTree Investments | IMPERIAL TOBACCO vs. Strategic Investments AS | IMPERIAL TOBACCO vs. ECHO INVESTMENT ZY |
| Sunstone Hotel vs. Transport International Holdings | Sunstone Hotel vs. Transportadora de Gas | Sunstone Hotel vs. IMPERIAL TOBACCO | Sunstone Hotel vs. BII Railway Transportation |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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