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 Pref, 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

-0.21

Correlation Coefficient

Kennedy Wilson  Sotherly Hotels

Very good diversification

The 3 months correlation between Kennedy and Sotherly is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kennedy Wilson Holdings and Sotherly Hotels Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels Pref 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 Pref 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 generate 0.94 times more return on investment than Sotherly Hotels. However, Kennedy Wilson Holdings is 1.07 times less risky than Sotherly Hotels. It trades about 0.01 of its potential returns per unit of risk. Sotherly Hotels Pref is currently generating about -0.04 per unit of risk. If you would invest  1,115  in Kennedy Wilson Holdings on September 14, 2024 and sell it today you would earn a total of  3.00  from holding Kennedy Wilson Holdings or generate 0.27% return on investment over 90 days.

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

Kennedy Wilson Holdings  vs.  Sotherly Hotels Pref

Kennedy Wilson Holdings

Risk-Adjusted Performance

0 of 100

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 fairly stable basic indicators, Kennedy Wilson is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Sotherly Hotels Pref

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels Pref has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Pref 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.