Correlation Between Sotherly Hotels and Regional Health

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

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

Diversification Opportunities for Sotherly Hotels and Regional Health

0.42

Correlation Coefficient

Sotherly Hotels  Regional Health

Very weak diversification

The 3 months correlation between Sotherly and Regional is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels Series and Regional Health Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regional Health Prop and Sotherly Hotels 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 Sotherly Hotels Series are associated (or correlated) with Regional Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regional Health Prop has no effect on the direction of Sotherly Hotels i.e., Sotherly Hotels and Regional Health go up and down completely randomly.

Pair Corralation between Sotherly Hotels and Regional Health

Assuming the 90 days horizon Sotherly Hotels Series is expected to under-perform the Regional Health. But the stock apears to be less risky and, when comparing its historical volatility, Sotherly Hotels Series is 5.43 times less risky than Regional Health. The stock trades about -0.08 of its potential returns per unit of risk. The Regional Health Properties is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  195.00  in Regional Health Properties on September 5, 2024 and sell it today you would lose (23.00) from holding Regional Health Properties or give up 11.79% of portfolio value over 90 days.

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

Sotherly Hotels Series  vs.  Regional Health Properties

Sotherly Hotels Series

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Regional Health Prop

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Regional Health Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, Regional Health is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sotherly Hotels and Regional Health

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

The idea behind Sotherly Hotels Series and Regional Health Properties 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.