Correlation Between DENSO - and Sunstone Hotel

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Can any of the company-specific risk be diversified away by investing in both DENSO - and Sunstone 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 DENSO - and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DENSO Dusseldorf and Sunstone Hotel Investors, you can compare the effects of market volatilities on DENSO - and Sunstone 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 DENSO - with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of DENSO - and Sunstone Hotel.

Diversification Opportunities for DENSO - and Sunstone Hotel

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between DENSO and Sunstone is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding DENSO Dusseldorf and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors and DENSO - 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 DENSO Dusseldorf are associated (or correlated) with Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of DENSO - i.e., DENSO - and Sunstone Hotel go up and down completely randomly.

Pair Corralation between DENSO - and Sunstone Hotel

Assuming the 90 days trading horizon DENSO Dusseldorf is expected to generate 1.14 times more return on investment than Sunstone Hotel. However, DENSO - is 1.14 times more volatile than Sunstone Hotel Investors. It trades about -0.02 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about -0.25 per unit of risk. If you would invest  1,250  in DENSO Dusseldorf on December 21, 2024 and sell it today you would lose (36.00) from holding DENSO Dusseldorf or give up 2.88% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

DENSO Dusseldorf  vs.  Sunstone Hotel Investors

 Performance 
       Timeline  
DENSO Dusseldorf 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days DENSO Dusseldorf has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, DENSO - is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Sunstone Hotel Investors 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Sunstone Hotel Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

DENSO - and Sunstone Hotel Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DENSO - and Sunstone Hotel

The main advantage of trading using opposite DENSO - and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DENSO - position performs unexpectedly, Sunstone 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 Sunstone Hotel will offset losses from the drop in Sunstone Hotel's long position.
The idea behind DENSO Dusseldorf and Sunstone Hotel Investors 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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