Correlation Between Sunstone Hotel and British American
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Sunstone Hotel and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and British American.
Diversification Opportunities for Sunstone Hotel and British American
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunstone and British is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and British American go up and down completely randomly.
Pair Corralation between Sunstone Hotel and British American
Assuming the 90 days horizon Sunstone Hotel is expected to generate 1.06 times less return on investment than British American. In addition to that, Sunstone Hotel is 1.47 times more volatile than British American Tobacco. It trades about 0.03 of its total potential returns per unit of risk. British American Tobacco is currently generating about 0.04 per unit of volatility. If you would invest 3,000 in British American Tobacco on October 30, 2024 and sell it today you would earn a total of 740.00 from holding British American Tobacco or generate 24.67% 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. British American Tobacco
Performance |
| Timeline |
| Sunstone Hotel Investors |
| British American Tobacco |
Sunstone Hotel and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and British American
The main advantage of trading using opposite Sunstone Hotel and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Sunstone Hotel vs. PNC Financial Services | Sunstone Hotel vs. Rayonier Advanced Materials | Sunstone Hotel vs. Treasury Wine Estates | Sunstone Hotel vs. JSC Halyk bank |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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