Correlation Between Sunstone Hotel and DALATA HOTEL

Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and DALATA HOTEL 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 DALATA HOTEL 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 DALATA HOTEL, you can compare the effects of market volatilities on Sunstone Hotel and DALATA HOTEL 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 DALATA HOTEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and DALATA HOTEL.

Diversification Opportunities for Sunstone Hotel and DALATA HOTEL

0.55

Correlation Coefficient

Sunstone Hotel  DALATA HOTEL

Very weak diversification

The 3 months correlation between Sunstone and DALATA is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and DALATA HOTEL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DALATA HOTEL 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 DALATA HOTEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DALATA HOTEL has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and DALATA HOTEL go up and down completely randomly.

Pair Corralation between Sunstone Hotel and DALATA HOTEL

Assuming the 90 days horizon Sunstone Hotel is expected to generate 2.02 times less return on investment than DALATA HOTEL. But when comparing it to its historical volatility, Sunstone Hotel Investors is 2.46 times less risky than DALATA HOTEL. It trades about 0.03 of its potential returns per unit of risk. DALATA HOTEL is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  358.00  in DALATA HOTEL on August 31, 2024 and sell it today you would earn a total of  58.00  from holding DALATA HOTEL or generate 16.2% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  DALATA HOTEL

Sunstone Hotel Investors

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunstone Hotel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

DALATA HOTEL

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in DALATA HOTEL are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, DALATA HOTEL is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sunstone Hotel and DALATA HOTEL

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

The idea behind Sunstone Hotel Investors and DALATA HOTEL 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.