Correlation Between Alliance Data and Sunstone Hotel
Can any of the company-specific risk be diversified away by investing in both Alliance Data 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 Alliance Data and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alliance Data Systems and Sunstone Hotel Investors, you can compare the effects of market volatilities on Alliance Data 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 Alliance Data with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alliance Data and Sunstone Hotel.
Diversification Opportunities for Alliance Data and Sunstone Hotel
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Alliance and Sunstone is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Alliance Data Systems 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 Alliance Data 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 Alliance Data Systems 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 Alliance Data i.e., Alliance Data and Sunstone Hotel go up and down completely randomly.
Pair Corralation between Alliance Data and Sunstone Hotel
Assuming the 90 days trading horizon Alliance Data Systems is expected to generate 1.58 times more return on investment than Sunstone Hotel. However, Alliance Data is 1.58 times more volatile than Sunstone Hotel Investors. It trades about 0.16 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.19 per unit of risk. If you would invest 4,438 in Alliance Data Systems on October 10, 2024 and sell it today you would earn a total of 1,370 from holding Alliance Data Systems or generate 30.87% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Alliance Data Systems vs. Sunstone Hotel Investors
Performance |
Timeline |
Alliance Data Systems |
Sunstone Hotel Investors |
Alliance Data and Sunstone Hotel Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Alliance Data and Sunstone Hotel
The main advantage of trading using opposite Alliance Data and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alliance Data 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.Alliance Data vs. Gladstone Investment | Alliance Data vs. WisdomTree Investments | Alliance Data vs. Mitsui Chemicals | Alliance Data vs. SLR Investment Corp |
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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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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