Correlation Between Sunstone Hotel and Bancroft Fund

Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel and Bancroft Fund 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 Bancroft Fund 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 Bancroft Fund, you can compare the effects of market volatilities on Sunstone Hotel and Bancroft Fund 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 Bancroft Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Bancroft Fund.

Diversification Opportunities for Sunstone Hotel and Bancroft Fund

-0.47

Correlation Coefficient

Sunstone Hotel  Bancroft Fund

Very good diversification

The 3 months correlation between Sunstone and Bancroft is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Bancroft Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancroft Fund 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 Bancroft Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancroft Fund has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Bancroft Fund go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Bancroft Fund

Considering the 90-day investment horizon Sunstone Hotel Investors is expected to generate 2.4 times more return on investment than Bancroft Fund. However, Sunstone Hotel is 2.4 times more volatile than Bancroft Fund. It trades about 0.09 of its potential returns per unit of risk. Bancroft Fund is currently generating about 0.06 per unit of risk. If you would invest  994.00  in Sunstone Hotel Investors on September 24, 2024 and sell it today you would earn a total of  207.00  from holding Sunstone Hotel Investors or generate 20.82% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  Bancroft Fund

Sunstone Hotel Investors

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Sunstone Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bancroft Fund

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bancroft Fund has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Bancroft Fund is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sunstone Hotel and Bancroft Fund

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

The idea behind Sunstone Hotel Investors and Bancroft Fund 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.