Correlation Between Sunstone Hotel and Hersha Hospitality

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

Diversification Opportunities for Sunstone Hotel and Hersha Hospitality

-0.02

Correlation Coefficient

Sunstone Hotel  Hersha Hospitality

Good diversification

The 3 months correlation between Sunstone and Hersha is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Hersha Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hersha Hospitality Trust 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 Hersha Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hersha Hospitality Trust has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Hersha Hospitality go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Hersha Hospitality

If you would invest  1,005  in Sunstone Hotel Investors on August 24, 2024 and sell it today you would earn a total of  13.00  from holding Sunstone Hotel Investors or generate 1.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.8%
Values	Daily Returns

Sunstone Hotel Investors  vs.  Hersha Hospitality Trust

Sunstone Hotel Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunstone Hotel Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical indicators, Sunstone Hotel is not utilizing all of its potentials. The new stock price disarray, may contribute to short-term losses for the investors.

Hersha Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hersha Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hersha Hospitality is not utilizing all of its potentials. The new stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Sunstone Hotel and Hersha Hospitality

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

The idea behind Sunstone Hotel Investors and Hersha Hospitality Trust 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.