Correlation Between MELIA HOTELS and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both MELIA HOTELS 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 MELIA HOTELS and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MELIA HOTELS and Sunstone Hotel Investors, you can compare the effects of market volatilities on MELIA HOTELS 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 MELIA HOTELS with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of MELIA HOTELS and Sunstone Hotel.
Diversification Opportunities for MELIA HOTELS and Sunstone Hotel
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MELIA and Sunstone is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding MELIA HOTELS 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 MELIA HOTELS 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 MELIA HOTELS 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 MELIA HOTELS i.e., MELIA HOTELS and Sunstone Hotel go up and down completely randomly.
Pair Corralation between MELIA HOTELS and Sunstone Hotel
Assuming the 90 days trading horizon MELIA HOTELS is expected to generate 1.81 times less return on investment than Sunstone Hotel. But when comparing it to its historical volatility, MELIA HOTELS is 1.54 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 0.16 of returns per unit of risk over similar time horizon. If you would invest 950.00 in Sunstone Hotel Investors on August 28, 2024 and sell it today you would earn a total of 70.00 from holding Sunstone Hotel Investors or generate 7.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MELIA HOTELS vs. Sunstone Hotel Investors
Performance |
| Timeline |
| MELIA HOTELS |
| Sunstone Hotel Investors |
MELIA HOTELS and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MELIA HOTELS and Sunstone Hotel
The main advantage of trading using opposite MELIA HOTELS and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MELIA HOTELS 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.| MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Apple Inc | MELIA HOTELS vs. Microsoft | MELIA HOTELS 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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