Correlation Between Sotherly Hotels and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both Sotherly 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 Sotherly 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 Sotherly Hotels and Sunstone Hotel Investors, you can compare the effects of market volatilities on Sotherly 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 Sotherly Hotels with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotherly Hotels and Sunstone Hotel.
Diversification Opportunities for Sotherly Hotels and Sunstone Hotel
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Sotherly and Sunstone is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly 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 Sotherly 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 Sotherly 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 Sotherly Hotels i.e., Sotherly Hotels and Sunstone Hotel go up and down completely randomly.
Pair Corralation between Sotherly Hotels and Sunstone Hotel
Given the investment horizon of 90 days Sotherly Hotels is expected to under-perform the Sunstone Hotel. In addition to that, Sotherly Hotels is 1.99 times more volatile than Sunstone Hotel Investors. It trades about -0.03 of its total potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.02 per unit of volatility. If you would invest 971.00 in Sunstone Hotel Investors on August 24, 2024 and sell it today you would earn a total of 66.00 from holding Sunstone Hotel Investors or generate 6.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sotherly Hotels vs. Sunstone Hotel Investors
Performance |
| Timeline |
| Sotherly Hotels |
| Sunstone Hotel Investors |
Sotherly Hotels and Sunstone Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sotherly Hotels and Sunstone Hotel
The main advantage of trading using opposite Sotherly Hotels and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotherly 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.| Sotherly Hotels vs. Summit Hotel Properties | Sotherly Hotels vs. Diamondrock Hospitality | Sotherly Hotels vs. RLJ Lodging Trust | Sotherly Hotels vs. Chatham Lodging Trust |
| Sunstone Hotel vs. Diamondrock Hospitality | Sunstone Hotel vs. Ryman Hospitality Properties | Sunstone Hotel vs. Pebblebrook Hotel Trust | Sunstone Hotel vs. RLJ Lodging Trust |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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