Correlation Between METHODE ELECTRONICS and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both METHODE ELECTRONICS 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 METHODE ELECTRONICS and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between METHODE ELECTRONICS and Sunstone Hotel Investors, you can compare the effects of market volatilities on METHODE ELECTRONICS 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 METHODE ELECTRONICS with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of METHODE ELECTRONICS and Sunstone Hotel.
Diversification Opportunities for METHODE ELECTRONICS and Sunstone Hotel
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between METHODE and Sunstone is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 METHODE ELECTRONICS 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 METHODE ELECTRONICS i.e., METHODE ELECTRONICS and Sunstone Hotel go up and down completely randomly.
Pair Corralation between METHODE ELECTRONICS and Sunstone Hotel
Assuming the 90 days trading horizon METHODE ELECTRONICS is expected to under-perform the Sunstone Hotel. In addition to that, METHODE ELECTRONICS is 2.36 times more volatile than Sunstone Hotel Investors. It trades about -0.05 of its total potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.03 per unit of volatility. If you would invest 834.00 in Sunstone Hotel Investors on August 28, 2024 and sell it today you would earn a total of 186.00 from holding Sunstone Hotel Investors or generate 22.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
METHODE ELECTRONICS vs. Sunstone Hotel Investors
Performance |
| Timeline |
| METHODE ELECTRONICS |
| Sunstone Hotel Investors |
METHODE ELECTRONICS and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with METHODE ELECTRONICS and Sunstone Hotel
The main advantage of trading using opposite METHODE ELECTRONICS and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if METHODE ELECTRONICS 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.| METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Apple Inc | METHODE ELECTRONICS vs. Microsoft | METHODE ELECTRONICS vs. Microsoft |
| Sunstone Hotel vs. ADRIATIC METALS LS 013355 | Sunstone Hotel vs. GALENA MINING LTD | Sunstone Hotel vs. Ross Stores | Sunstone Hotel vs. Perseus Mining Limited |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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