Correlation Between Sotherly Hotels and Boston Properties

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

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

Diversification Opportunities for Sotherly Hotels and Boston Properties

0.51

Correlation Coefficient

Sotherly Hotels  Boston Properties

Very weak diversification

The 3 months correlation between Sotherly and Boston is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels Series and Boston Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Properties and Sotherly Hotels 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 Sotherly Hotels Series are associated (or correlated) with Boston Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Properties has no effect on the direction of Sotherly Hotels i.e., Sotherly Hotels and Boston Properties go up and down completely randomly.

Pair Corralation between Sotherly Hotels and Boston Properties

Assuming the 90 days horizon Sotherly Hotels is expected to generate 1.12 times less return on investment than Boston Properties. In addition to that, Sotherly Hotels is 1.69 times more volatile than Boston Properties. It trades about 0.01 of its total potential returns per unit of risk. Boston Properties is currently generating about 0.02 per unit of volatility. If you would invest  6,569  in Boston Properties on October 23, 2024 and sell it today you would earn a total of  750.00  from holding Boston Properties or generate 11.42% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.95%
Values	Daily Returns

Sotherly Hotels Series  vs.  Boston Properties

Sotherly Hotels Series

Risk-Adjusted Performance

0 of 100

Very Weak

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

Boston Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Properties has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Sotherly Hotels and Boston Properties

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

The idea behind Sotherly Hotels Series and Boston Properties 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.