Correlation Between NH HOTEL and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both NH HOTEL 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 NH HOTEL and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NH HOTEL GROUP and Sunstone Hotel Investors, you can compare the effects of market volatilities on NH HOTEL 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 NH HOTEL with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of NH HOTEL and Sunstone Hotel.
Diversification Opportunities for NH HOTEL and Sunstone Hotel
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between NH5 and Sunstone is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding NH HOTEL GROUP 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 NH HOTEL 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 NH HOTEL GROUP 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 NH HOTEL i.e., NH HOTEL and Sunstone Hotel go up and down completely randomly.
Pair Corralation between NH HOTEL and Sunstone Hotel
Assuming the 90 days trading horizon NH HOTEL GROUP is expected to generate 1.91 times more return on investment than Sunstone Hotel. However, NH HOTEL is 1.91 times more volatile than Sunstone Hotel Investors. It trades about 0.04 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.03 per unit of risk. If you would invest 292.00 in NH HOTEL GROUP on August 28, 2024 and sell it today you would earn a total of 114.00 from holding NH HOTEL GROUP or generate 39.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NH HOTEL GROUP vs. Sunstone Hotel Investors
Performance |
| Timeline |
| NH HOTEL GROUP |
| Sunstone Hotel Investors |
NH HOTEL and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NH HOTEL and Sunstone Hotel
The main advantage of trading using opposite NH HOTEL and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NH HOTEL 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.The idea behind NH HOTEL GROUP and Sunstone Hotel Investors pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| 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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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