Correlation Between Sunstone Hotel and Chatham Lodging

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

Diversification Opportunities for Sunstone Hotel and Chatham Lodging

0.93

Correlation Coefficient

Sunstone Hotel  Chatham Lodging

Almost no diversification

The 3 months correlation between Sunstone and Chatham is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging 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 Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Chatham Lodging go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Chatham Lodging

Considering the 90-day investment horizon Sunstone Hotel Investors is expected to under-perform the Chatham Lodging. In addition to that, Sunstone Hotel is 1.09 times more volatile than Chatham Lodging Trust. It trades about -0.21 of its total potential returns per unit of risk. Chatham Lodging Trust is currently generating about -0.22 per unit of volatility. If you would invest  891.00  in Chatham Lodging Trust on December 29, 2024 and sell it today you would lose (169.00) from holding Chatham Lodging Trust or give up 18.97% of portfolio value over 90 days.

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

Sunstone Hotel Investors  vs.  Chatham Lodging Trust

Sunstone Hotel Investors

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sunstone Hotel Investors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of sluggish performance in the last few months, the Stock's technical indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Chatham Lodging Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chatham Lodging Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Sunstone Hotel and Chatham Lodging

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

The idea behind Sunstone Hotel Investors and Chatham Lodging 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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.