Correlation Between Sunstone Hotel and Gladstone Investment
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and Gladstone Investment 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 Gladstone Investment 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 Gladstone Investment, you can compare the effects of market volatilities on Sunstone Hotel and Gladstone Investment 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 Gladstone Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Gladstone Investment.
Diversification Opportunities for Sunstone Hotel and Gladstone Investment
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunstone and Gladstone is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Gladstone Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gladstone Investment 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 Gladstone Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gladstone Investment has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Gladstone Investment go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Gladstone Investment
Assuming the 90 days horizon Sunstone Hotel is expected to generate 1.33 times less return on investment than Gladstone Investment. But when comparing it to its historical volatility, Sunstone Hotel Investors is 1.13 times less risky than Gladstone Investment. It trades about 0.04 of its potential returns per unit of risk. Gladstone Investment is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 1,192 in Gladstone Investment on September 3, 2024 and sell it today you would earn a total of 109.00 from holding Gladstone Investment or generate 9.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. Gladstone Investment
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Gladstone Investment |
Sunstone Hotel and Gladstone Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Gladstone Investment
The main advantage of trading using opposite Sunstone Hotel and Gladstone Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Gladstone Investment 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 Gladstone Investment will offset losses from the drop in Gladstone Investment's long position.| Sunstone Hotel vs. Transport International Holdings | Sunstone Hotel vs. Transportadora de Gas | Sunstone Hotel vs. IMPERIAL TOBACCO | Sunstone Hotel vs. BII Railway Transportation |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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