Correlation Between Sunstone Hotel and FirstGroup Plc
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and FirstGroup Plc 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 FirstGroup Plc 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 FirstGroup plc, you can compare the effects of market volatilities on Sunstone Hotel and FirstGroup Plc 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 FirstGroup Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and FirstGroup Plc.
Diversification Opportunities for Sunstone Hotel and FirstGroup Plc
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Sunstone and FirstGroup is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and FirstGroup plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FirstGroup plc 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 FirstGroup Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FirstGroup plc has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and FirstGroup Plc go up and down completely randomly.
Pair Corralation between Sunstone Hotel and FirstGroup Plc
Assuming the 90 days horizon Sunstone Hotel is expected to generate 2.34 times less return on investment than FirstGroup Plc. But when comparing it to its historical volatility, Sunstone Hotel Investors is 1.14 times less risky than FirstGroup Plc. It trades about 0.03 of its potential returns per unit of risk. FirstGroup plc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 117.00 in FirstGroup plc on October 23, 2024 and sell it today you would earn a total of 77.00 from holding FirstGroup plc or generate 65.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. FirstGroup plc
Performance |
| Timeline |
| Sunstone Hotel Investors |
| FirstGroup plc |
Sunstone Hotel and FirstGroup Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and FirstGroup Plc
The main advantage of trading using opposite Sunstone Hotel and FirstGroup Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, FirstGroup Plc 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 FirstGroup Plc will offset losses from the drop in FirstGroup Plc's long position.| Sunstone Hotel vs. Host Hotels Resorts | Sunstone Hotel vs. Park Hotels Resorts | Sunstone Hotel vs. Xenia Hotels Resorts | Sunstone Hotel vs. Summit Hotel Properties |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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