Correlation Between Sunstone Hotel and Ashford Hospitality

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

By analyzing existing cross correlation between Sunstone Hotel Investors and Ashford Hospitality Trust, you can compare the effects of market volatilities on Sunstone Hotel and Ashford Hospitality 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 Sunstone Hotel with a short position of Ashford Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Ashford Hospitality.

Diversification Opportunities for Sunstone Hotel and Ashford Hospitality

-0.24

Correlation Coefficient

Sunstone Hotel  Ashford Hospitality

Very good diversification

The 3 months correlation between Sunstone and Ashford is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Ashford Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashford Hospitality Trust and Sunstone Hotel 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 Sunstone Hotel Investors are associated (or correlated) with Ashford Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashford Hospitality Trust has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Ashford Hospitality

Assuming the 90 days trading horizon Sunstone Hotel Investors is expected to generate 0.46 times more return on investment than Ashford Hospitality. However, Sunstone Hotel Investors is 2.19 times less risky than Ashford Hospitality. It trades about 0.06 of its potential returns per unit of risk. Ashford Hospitality Trust is currently generating about 0.0 per unit of risk. If you would invest  1,590  in Sunstone Hotel Investors on September 20, 2024 and sell it today you would earn a total of  571.00  from holding Sunstone Hotel Investors or generate 35.91% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  Ashford Hospitality Trust

Sunstone Hotel Investors

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunstone Hotel Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Sunstone Hotel is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Ashford Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashford Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Preferred Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Sunstone Hotel and Ashford Hospitality

The main advantage of trading using opposite Sunstone Hotel and Ashford Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Ashford Hospitality 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 Ashford Hospitality will offset losses from the drop in Ashford Hospitality's long position.

The idea behind Sunstone Hotel Investors and Ashford Hospitality Trust 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..