Correlation Between Superior Plus and Sotherly Hotels

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

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

Diversification Opportunities for Superior Plus and Sotherly Hotels

0.42

Correlation Coefficient

Superior Plus  Sotherly Hotels

Very weak diversification

The 3 months correlation between Superior and Sotherly is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Superior Plus Corp and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and Superior Plus 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 Superior Plus Corp 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 Superior Plus i.e., Superior Plus and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Superior Plus and Sotherly Hotels

Assuming the 90 days horizon Superior Plus Corp is expected to generate 0.68 times more return on investment than Sotherly Hotels. However, Superior Plus Corp is 1.47 times less risky than Sotherly Hotels. It trades about -0.06 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.06 per unit of risk. If you would invest  421.00  in Superior Plus Corp on November 28, 2024 and sell it today you would lose (29.00) from holding Superior Plus Corp or give up 6.89% of portfolio value over 90 days.

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

Superior Plus Corp  vs.  Sotherly Hotels

Superior Plus Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Superior Plus Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Sotherly Hotels

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Superior Plus and Sotherly Hotels

The main advantage of trading using opposite Superior Plus and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Superior Plus 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 Superior Plus Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.