Correlation Between Sunstone Hotel and Summit Hotel
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and Summit 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 Sunstone Hotel and Summit Hotel 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 Summit Hotel Properties, you can compare the effects of market volatilities on Sunstone Hotel and Summit 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 Sunstone Hotel with a short position of Summit Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Summit Hotel.
Diversification Opportunities for Sunstone Hotel and Summit Hotel
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sunstone and Summit is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Summit Hotel Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Hotel Properties 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 Summit Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Hotel Properties has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Summit Hotel go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Summit Hotel
Considering the 90-day investment horizon Sunstone Hotel Investors is expected to under-perform the Summit Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Sunstone Hotel Investors is 1.11 times less risky than Summit Hotel. The stock trades about -0.18 of its potential returns per unit of risk. The Summit Hotel Properties is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 659.00 in Summit Hotel Properties on November 18, 2024 and sell it today you would lose (6.00) from holding Summit Hotel Properties or give up 0.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. Summit Hotel Properties
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Summit Hotel Properties |
Sunstone Hotel and Summit Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Summit Hotel
The main advantage of trading using opposite Sunstone Hotel and Summit Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Summit 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 Summit Hotel will offset losses from the drop in Summit Hotel'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 |
| Summit Hotel vs. Diamondrock Hospitality | Summit Hotel vs. RLJ Lodging Trust | Summit Hotel vs. Pebblebrook Hotel Trust | Summit Hotel vs. Sunstone Hotel Investors |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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