Correlation Between Sunstone Hotel and United Airlines
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and United Airlines 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 United Airlines 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 United Airlines Holdings, you can compare the effects of market volatilities on Sunstone Hotel and United Airlines 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 United Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and United Airlines.
Diversification Opportunities for Sunstone Hotel and United Airlines
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Sunstone and United is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and United Airlines Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Airlines Holdings 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 United Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Airlines Holdings has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and United Airlines go up and down completely randomly.
Pair Corralation between Sunstone Hotel and United Airlines
Assuming the 90 days horizon Sunstone Hotel is expected to generate 3.54 times less return on investment than United Airlines. But when comparing it to its historical volatility, Sunstone Hotel Investors is 1.6 times less risky than United Airlines. It trades about 0.16 of its potential returns per unit of risk. United Airlines Holdings is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 7,177 in United Airlines Holdings on September 2, 2024 and sell it today you would earn a total of 1,965 from holding United Airlines Holdings or generate 27.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. United Airlines Holdings
Performance |
| Timeline |
| Sunstone Hotel Investors |
| United Airlines Holdings |
Sunstone Hotel and United Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and United Airlines
The main advantage of trading using opposite Sunstone Hotel and United Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, United Airlines 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 United Airlines will offset losses from the drop in United Airlines' long position.| Sunstone Hotel vs. Nippon Steel | Sunstone Hotel vs. VIAPLAY GROUP AB | Sunstone Hotel vs. ALGOMA STEEL GROUP | Sunstone Hotel vs. Perma Fix Environmental Services |
| United Airlines vs. Superior Plus Corp | United Airlines vs. NMI Holdings | United Airlines vs. Origin Agritech | United Airlines vs. SIVERS SEMICONDUCTORS AB |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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