Correlation Between Agree Realty and Sotherly Hotels

Can any of the company-specific risk be diversified away by investing in both Agree Realty and Sotherly 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 Agree Realty and Sotherly Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Agree Realty and Sotherly Hotels, you can compare the effects of market volatilities on Agree Realty and Sotherly 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 Agree Realty with a short position of Sotherly Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Agree Realty and Sotherly Hotels.

Diversification Opportunities for Agree Realty and Sotherly Hotels

-0.51

Correlation Coefficient

Agree Realty  Sotherly Hotels

Excellent diversification

The 3 months correlation between Agree and Sotherly is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Agree Realty and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and Agree Realty 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 Agree Realty are associated (or correlated) with Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of Agree Realty i.e., Agree Realty and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Agree Realty and Sotherly Hotels

Considering the 90-day investment horizon Agree Realty is expected to generate 0.19 times more return on investment than Sotherly Hotels. However, Agree Realty is 5.21 times less risky than Sotherly Hotels. It trades about 0.12 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.07 per unit of risk. If you would invest  7,252  in Agree Realty on August 30, 2024 and sell it today you would earn a total of  513.00  from holding Agree Realty or generate 7.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Agree Realty  vs.  Sotherly Hotels

Agree Realty

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Agree Realty are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Agree Realty may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sotherly Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Agree Realty and Sotherly Hotels

The main advantage of trading using opposite Agree Realty and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Agree Realty position performs unexpectedly, Sotherly 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 Sotherly Hotels will offset losses from the drop in Sotherly Hotels' long position.

The idea behind Agree Realty and Sotherly Hotels pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.