Correlation Between SoundHound and HOSPITALITY

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

By analyzing existing cross correlation between SoundHound AI and HOSPITALITY PPTYS TR, you can compare the effects of market volatilities on SoundHound and HOSPITALITY 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 SoundHound with a short position of HOSPITALITY. Check out your portfolio center. Please also check ongoing floating volatility patterns of SoundHound and HOSPITALITY.

Diversification Opportunities for SoundHound and HOSPITALITY

-0.67

Correlation Coefficient

SoundHound  HOSPITALITY

Excellent diversification

The 3 months correlation between SoundHound and HOSPITALITY is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding SoundHound AI and HOSPITALITY PPTYS TR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HOSPITALITY PPTYS and SoundHound 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 SoundHound AI are associated (or correlated) with HOSPITALITY. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HOSPITALITY PPTYS has no effect on the direction of SoundHound i.e., SoundHound and HOSPITALITY go up and down completely randomly.

Pair Corralation between SoundHound and HOSPITALITY

Given the investment horizon of 90 days SoundHound is expected to generate 4.0 times less return on investment than HOSPITALITY. But when comparing it to its historical volatility, SoundHound AI is 7.0 times less risky than HOSPITALITY. It trades about 0.1 of its potential returns per unit of risk. HOSPITALITY PPTYS TR is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,211  in HOSPITALITY PPTYS TR on September 14, 2024 and sell it today you would earn a total of  1,394  from holding HOSPITALITY PPTYS TR or generate 19.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	96.16%
Values	Daily Returns

SoundHound AI  vs.  HOSPITALITY PPTYS TR

SoundHound AI

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SoundHound AI are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, SoundHound displayed solid returns over the last few months and may actually be approaching a breakup point.

HOSPITALITY PPTYS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HOSPITALITY PPTYS TR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, HOSPITALITY is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SoundHound and HOSPITALITY

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

The idea behind SoundHound AI and HOSPITALITY PPTYS TR 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 Transaction History module to view history of all your transactions and understand their impact on performance.