Correlation Between Camden Property and Sotherly Hotels

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

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

Diversification Opportunities for Camden Property and Sotherly Hotels

0.16

Correlation Coefficient

Camden Property  Sotherly Hotels

Average diversification

The 3 months correlation between Camden and Sotherly is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Camden Property Trust and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and Camden Property 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 Camden Property Trust 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 Camden Property i.e., Camden Property and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Camden Property and Sotherly Hotels

Considering the 90-day investment horizon Camden Property Trust is expected to generate 0.46 times more return on investment than Sotherly Hotels. However, Camden Property Trust is 2.16 times less risky than Sotherly Hotels. It trades about 0.04 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.05 per unit of risk. If you would invest  10,049  in Camden Property Trust on December 2, 2024 and sell it today you would earn a total of  2,357  from holding Camden Property Trust or generate 23.46% return on investment over 90 days.

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

Camden Property Trust  vs.  Sotherly Hotels

Camden Property Trust

Risk-Adjusted Performance

Weak

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

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. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Camden Property and Sotherly Hotels

The main advantage of trading using opposite Camden Property and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Camden Property 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 Camden Property Trust 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.