Correlation Between Sunstone Hotel and Choice Hotels
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and Choice Hotels 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 Choice Hotels 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 Choice Hotels International, you can compare the effects of market volatilities on Sunstone Hotel and Choice Hotels 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 Choice Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Choice Hotels.
Diversification Opportunities for Sunstone Hotel and Choice Hotels
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sunstone and Choice is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Choice Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choice Hotels Intern 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 Choice Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choice Hotels Intern has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Choice Hotels go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Choice Hotels
Assuming the 90 days horizon Sunstone Hotel is expected to generate 1.44 times less return on investment than Choice Hotels. In addition to that, Sunstone Hotel is 1.41 times more volatile than Choice Hotels International. It trades about 0.14 of its total potential returns per unit of risk. Choice Hotels International is currently generating about 0.29 per unit of volatility. If you would invest 12,800 in Choice Hotels International on August 31, 2024 and sell it today you would earn a total of 1,300 from holding Choice Hotels International or generate 10.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. Choice Hotels International
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Choice Hotels Intern |
Sunstone Hotel and Choice Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Choice Hotels
The main advantage of trading using opposite Sunstone Hotel and Choice Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Choice Hotels 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 Choice Hotels will offset losses from the drop in Choice Hotels' long position.| Sunstone Hotel vs. LG Display Co | Sunstone Hotel vs. YOOMA WELLNESS INC | Sunstone Hotel vs. Tencent Music Entertainment | Sunstone Hotel vs. FEMALE HEALTH |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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