Correlation Between Ryman Hospitality and Sotherly Hotels

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

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

Diversification Opportunities for Ryman Hospitality and Sotherly Hotels

-0.6

Correlation Coefficient

Ryman Hospitality  Sotherly Hotels

Excellent diversification

The 3 months correlation between Ryman and Sotherly is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Ryman Hospitality Properties and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and Ryman Hospitality 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 Ryman Hospitality Properties 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 has no effect on the direction of Ryman Hospitality i.e., Ryman Hospitality and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Ryman Hospitality and Sotherly Hotels

Considering the 90-day investment horizon Ryman Hospitality Properties is expected to generate 0.44 times more return on investment than Sotherly Hotels. However, Ryman Hospitality Properties is 2.26 times less risky than Sotherly Hotels. It trades about 0.04 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.03 per unit of risk. If you would invest  10,432  in Ryman Hospitality Properties on September 12, 2024 and sell it today you would earn a total of  1,272  from holding Ryman Hospitality Properties or generate 12.19% return on investment over 90 days.

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

Ryman Hospitality Properties  vs.  Sotherly Hotels

Ryman Hospitality

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ryman Hospitality Properties are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively sluggish technical indicators, Ryman Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

Sotherly Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical 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 Ryman Hospitality and Sotherly Hotels

The main advantage of trading using opposite Ryman Hospitality and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryman Hospitality 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 Ryman Hospitality Properties and Sotherly Hotels 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.