Correlation Between Sunstone Hotel and Meli Hotels
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and Meli 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 Meli 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 Meli Hotels International, you can compare the effects of market volatilities on Sunstone Hotel and Meli 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 Meli Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Meli Hotels.
Diversification Opportunities for Sunstone Hotel and Meli Hotels
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunstone and Meli is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Meli Hotels International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meli Hotels International 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 Meli Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meli Hotels International has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Meli Hotels go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Meli Hotels
Assuming the 90 days horizon Sunstone Hotel is expected to generate 2.3 times less return on investment than Meli Hotels. In addition to that, Sunstone Hotel is 1.15 times more volatile than Meli Hotels International. It trades about 0.04 of its total potential returns per unit of risk. Meli Hotels International is currently generating about 0.1 per unit of volatility. If you would invest 643.00 in Meli Hotels International on August 25, 2024 and sell it today you would earn a total of 57.00 from holding Meli Hotels International or generate 8.86% 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. Meli Hotels International
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Meli Hotels International |
Sunstone Hotel and Meli Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Meli Hotels
The main advantage of trading using opposite Sunstone Hotel and Meli Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Meli 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 Meli Hotels will offset losses from the drop in Meli Hotels' long position.| Sunstone Hotel vs. PTT Global Chemical | Sunstone Hotel vs. Sumitomo Chemical | Sunstone Hotel vs. BURLINGTON STORES | Sunstone Hotel vs. Mitsui Chemicals |
| Meli Hotels vs. Zoom Video Communications | Meli Hotels vs. Warner Music Group | Meli Hotels vs. National Beverage Corp | Meli Hotels vs. Evolution Mining Limited |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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