Correlation Between Kite Realty and Sotherly Hotels

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

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

Diversification Opportunities for Kite Realty and Sotherly Hotels

-0.19

Correlation Coefficient

Kite Realty  Sotherly Hotels

Good diversification

The 3 months correlation between Kite and Sotherly is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Kite Realty Group and Sotherly Hotels Series in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels Series and Kite Realty 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 Kite Realty Group 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 Series has no effect on the direction of Kite Realty i.e., Kite Realty and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Kite Realty and Sotherly Hotels

Considering the 90-day investment horizon Kite Realty Group is expected to under-perform the Sotherly Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Kite Realty Group is 1.3 times less risky than Sotherly Hotels. The stock trades about -0.15 of its potential returns per unit of risk. The Sotherly Hotels Series is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,679  in Sotherly Hotels Series on December 5, 2024 and sell it today you would lose (16.00) from holding Sotherly Hotels Series or give up 0.95% of portfolio value over 90 days.

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

Kite Realty Group  vs.  Sotherly Hotels Series

Kite Realty Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kite Realty Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Sotherly Hotels Series

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sotherly Hotels Series has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sotherly Hotels is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kite Realty and Sotherly Hotels

The main advantage of trading using opposite Kite Realty and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kite Realty 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 Kite Realty Group and Sotherly Hotels Series 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.