Correlation Between AdvisorShares Hotel and SonicShares Global

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

By analyzing existing cross correlation between AdvisorShares Hotel ETF and SonicShares Global Shipping, you can compare the effects of market volatilities on AdvisorShares Hotel and SonicShares Global 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 AdvisorShares Hotel with a short position of SonicShares Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of AdvisorShares Hotel and SonicShares Global.

Diversification Opportunities for AdvisorShares Hotel and SonicShares Global

-0.85

Correlation Coefficient

AdvisorShares Hotel  SonicShares Global

Pay attention - limited upside

The 3 months correlation between AdvisorShares and SonicShares is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding AdvisorShares Hotel ETF and SonicShares Global Shipping in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SonicShares Global and AdvisorShares 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 AdvisorShares Hotel ETF are associated (or correlated) with SonicShares Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SonicShares Global has no effect on the direction of AdvisorShares Hotel i.e., AdvisorShares Hotel and SonicShares Global go up and down completely randomly.

Pair Corralation between AdvisorShares Hotel and SonicShares Global

Given the investment horizon of 90 days AdvisorShares Hotel ETF is expected to generate 0.82 times more return on investment than SonicShares Global. However, AdvisorShares Hotel ETF is 1.23 times less risky than SonicShares Global. It trades about 0.12 of its potential returns per unit of risk. SonicShares Global Shipping is currently generating about -0.09 per unit of risk. If you would invest  2,807  in AdvisorShares Hotel ETF on September 26, 2024 and sell it today you would earn a total of  530.00  from holding AdvisorShares Hotel ETF or generate 18.88% return on investment over 90 days.

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

AdvisorShares Hotel ETF  vs.  SonicShares Global Shipping

AdvisorShares Hotel ETF

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AdvisorShares Hotel ETF are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, AdvisorShares Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SonicShares Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SonicShares Global Shipping has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Etf's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the exchange-traded fund private investors.

Pair Trading with AdvisorShares Hotel and SonicShares Global

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

The idea behind AdvisorShares Hotel ETF and SonicShares Global Shipping 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.