Correlation Between Kennedy Wilson and Sotherly Hotels

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

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

Diversification Opportunities for Kennedy Wilson and Sotherly Hotels

0.07

Correlation Coefficient

Kennedy Wilson  Sotherly Hotels

Significant diversification

The 3 months correlation between Kennedy and Sotherly is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kennedy Wilson Holdings and Sotherly Hotels PR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels PR and Kennedy Wilson 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 Kennedy Wilson Holdings 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 PR has no effect on the direction of Kennedy Wilson i.e., Kennedy Wilson and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Kennedy Wilson and Sotherly Hotels

Allowing for the 90-day total investment horizon Kennedy Wilson Holdings is expected to under-perform the Sotherly Hotels. In addition to that, Kennedy Wilson is 1.17 times more volatile than Sotherly Hotels PR. It trades about -0.09 of its total potential returns per unit of risk. Sotherly Hotels PR is currently generating about 0.04 per unit of volatility. If you would invest  1,708  in Sotherly Hotels PR on December 29, 2024 and sell it today you would earn a total of  52.00  from holding Sotherly Hotels PR or generate 3.04% return on investment over 90 days.

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

Kennedy Wilson Holdings  vs.  Sotherly Hotels PR

Kennedy Wilson Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kennedy Wilson Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Sotherly Hotels PR

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sotherly Hotels PR are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sotherly Hotels is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kennedy Wilson and Sotherly Hotels

The main advantage of trading using opposite Kennedy Wilson and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kennedy Wilson 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 Kennedy Wilson Holdings and Sotherly Hotels PR 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.