Correlation Between Sunstone Hotel and NorAm Drilling
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and NorAm Drilling 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 NorAm Drilling 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 NorAm Drilling AS, you can compare the effects of market volatilities on Sunstone Hotel and NorAm Drilling 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 NorAm Drilling. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and NorAm Drilling.
Diversification Opportunities for Sunstone Hotel and NorAm Drilling
-0.77 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Sunstone and NorAm is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and NorAm Drilling AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NorAm Drilling AS 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 NorAm Drilling. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NorAm Drilling AS has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and NorAm Drilling go up and down completely randomly.
Pair Corralation between Sunstone Hotel and NorAm Drilling
Assuming the 90 days horizon Sunstone Hotel is expected to generate 9.13 times less return on investment than NorAm Drilling. But when comparing it to its historical volatility, Sunstone Hotel Investors is 6.7 times less risky than NorAm Drilling. It trades about 0.04 of its potential returns per unit of risk. NorAm Drilling AS is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 135.00 in NorAm Drilling AS on October 13, 2024 and sell it today you would earn a total of 156.00 from holding NorAm Drilling AS or generate 115.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. NorAm Drilling AS
Performance |
| Timeline |
| Sunstone Hotel Investors |
| NorAm Drilling AS |
Sunstone Hotel and NorAm Drilling Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and NorAm Drilling
The main advantage of trading using opposite Sunstone Hotel and NorAm Drilling positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, NorAm Drilling 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 NorAm Drilling will offset losses from the drop in NorAm Drilling's long position.| Sunstone Hotel vs. Casio Computer CoLtd | Sunstone Hotel vs. SMA Solar Technology | Sunstone Hotel vs. TYSON FOODS A | Sunstone Hotel vs. Mitsui Chemicals |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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