Correlation Between Sunstone Hotel and BBVA Banco

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Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and BBVA Banco 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 BBVA Banco 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 BBVA Banco Frances, you can compare the effects of market volatilities on Sunstone Hotel and BBVA Banco 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 BBVA Banco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and BBVA Banco.

Diversification Opportunities for Sunstone Hotel and BBVA Banco

0.53
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Sunstone and BBVA is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and BBVA Banco Frances in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBVA Banco Frances 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 BBVA Banco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBVA Banco Frances has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and BBVA Banco go up and down completely randomly.

Pair Corralation between Sunstone Hotel and BBVA Banco

Assuming the 90 days horizon Sunstone Hotel Investors is expected to under-perform the BBVA Banco. But the stock apears to be less risky and, when comparing its historical volatility, Sunstone Hotel Investors is 11.13 times less risky than BBVA Banco. The stock trades about -0.07 of its potential returns per unit of risk. The BBVA Banco Frances is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,660  in BBVA Banco Frances on October 15, 2024 and sell it today you would earn a total of  560.00  from holding BBVA Banco Frances or generate 33.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Sunstone Hotel Investors  vs.  BBVA Banco Frances

 Performance 
       Timeline  
Sunstone Hotel Investors 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Sunstone Hotel reported solid returns over the last few months and may actually be approaching a breakup point.
BBVA Banco Frances 

Risk-Adjusted Performance

17 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in BBVA Banco Frances are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, BBVA Banco reported solid returns over the last few months and may actually be approaching a breakup point.

Sunstone Hotel and BBVA Banco Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sunstone Hotel and BBVA Banco

The main advantage of trading using opposite Sunstone Hotel and BBVA Banco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, BBVA Banco 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 BBVA Banco will offset losses from the drop in BBVA Banco's long position.
The idea behind Sunstone Hotel Investors and BBVA Banco Frances 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.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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