Correlation Between Sunstone Hotel and Hersha Hospitality
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and Hersha Hospitality 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 Sunstone Hotel and Hersha Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunstone Hotel Investors and Hersha Hospitality Trust, you can compare the effects of market volatilities on Sunstone Hotel and Hersha Hospitality 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 Sunstone Hotel with a short position of Hersha Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Hersha Hospitality.
Diversification Opportunities for Sunstone Hotel and Hersha Hospitality
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sunstone and Hersha is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Hersha Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hersha Hospitality Trust and Sunstone 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 Sunstone Hotel Investors are associated (or correlated) with Hersha Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hersha Hospitality Trust has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Hersha Hospitality go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Hersha Hospitality
Considering the 90-day investment horizon Sunstone Hotel Investors is expected to generate 0.74 times more return on investment than Hersha Hospitality. However, Sunstone Hotel Investors is 1.36 times less risky than Hersha Hospitality. It trades about 0.01 of its potential returns per unit of risk. Hersha Hospitality Trust is currently generating about -0.09 per unit of risk. If you would invest 1,026 in Sunstone Hotel Investors on August 23, 2024 and sell it today you would lose (8.00) from holding Sunstone Hotel Investors or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 32.26% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. Hersha Hospitality Trust
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Hersha Hospitality Trust |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Sunstone Hotel and Hersha Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Hersha Hospitality
The main advantage of trading using opposite Sunstone Hotel and Hersha Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Hersha Hospitality 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 Hersha Hospitality will offset losses from the drop in Hersha Hospitality's long position.| Sunstone Hotel vs. RLJ Lodging Trust | Sunstone Hotel vs. Pebblebrook Hotel Trust | Sunstone Hotel vs. Summit Hotel Properties | Sunstone Hotel vs. Ryman Hospitality Properties |
| Hersha Hospitality vs. RLJ Lodging Trust | Hersha Hospitality vs. Sunstone Hotel Investors | Hersha Hospitality vs. Pebblebrook Hotel Trust | Hersha Hospitality vs. Summit Hotel Properties |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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