Correlation Between Sunstone Hotel and HANOVER INSURANCE
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and HANOVER INSURANCE 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 HANOVER INSURANCE 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 HANOVER INSURANCE, you can compare the effects of market volatilities on Sunstone Hotel and HANOVER INSURANCE 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 HANOVER INSURANCE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and HANOVER INSURANCE.
Diversification Opportunities for Sunstone Hotel and HANOVER INSURANCE
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunstone and HANOVER is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and HANOVER INSURANCE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HANOVER INSURANCE 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 HANOVER INSURANCE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HANOVER INSURANCE has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and HANOVER INSURANCE go up and down completely randomly.
Pair Corralation between Sunstone Hotel and HANOVER INSURANCE
Assuming the 90 days horizon Sunstone Hotel is expected to generate 2.19 times less return on investment than HANOVER INSURANCE. In addition to that, Sunstone Hotel is 1.08 times more volatile than HANOVER INSURANCE. It trades about 0.05 of its total potential returns per unit of risk. HANOVER INSURANCE is currently generating about 0.11 per unit of volatility. If you would invest 10,398 in HANOVER INSURANCE on September 1, 2024 and sell it today you would earn a total of 4,802 from holding HANOVER INSURANCE or generate 46.18% 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. HANOVER INSURANCE
Performance |
| Timeline |
| Sunstone Hotel Investors |
| HANOVER INSURANCE |
Sunstone Hotel and HANOVER INSURANCE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and HANOVER INSURANCE
The main advantage of trading using opposite Sunstone Hotel and HANOVER INSURANCE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, HANOVER INSURANCE 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 HANOVER INSURANCE will offset losses from the drop in HANOVER INSURANCE's long position.The idea behind Sunstone Hotel Investors and HANOVER INSURANCE 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.| HANOVER INSURANCE vs. SIVERS SEMICONDUCTORS AB | HANOVER INSURANCE vs. Darden Restaurants | HANOVER INSURANCE vs. Reliance Steel Aluminum | HANOVER INSURANCE vs. Q2M Managementberatung AG |
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.
Other Complementary Tools
| Commodity Directory Find actively traded commodities issued by global exchanges | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Investing Opportunities Build portfolios using our predefined set of ideas and optimize them against your investing preferences | |
| Stocks Directory Find actively traded stocks across global markets | |
| Transaction History View history of all your transactions and understand their impact on performance |