Correlation Between Sotherly Hotels and InnSuites Hospitality

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

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

Diversification Opportunities for Sotherly Hotels and InnSuites Hospitality

-0.19

Correlation Coefficient

Sotherly Hotels  InnSuites Hospitality

Good diversification

The 3 months correlation between Sotherly and InnSuites is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels PR and InnSuites Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InnSuites Hospitality 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 PR are associated (or correlated) with InnSuites Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InnSuites Hospitality has no effect on the direction of Sotherly Hotels i.e., Sotherly Hotels and InnSuites Hospitality go up and down completely randomly.

Pair Corralation between Sotherly Hotels and InnSuites Hospitality

Assuming the 90 days horizon Sotherly Hotels is expected to generate 3.67 times less return on investment than InnSuites Hospitality. But when comparing it to its historical volatility, Sotherly Hotels PR is 1.41 times less risky than InnSuites Hospitality. It trades about 0.08 of its potential returns per unit of risk. InnSuites Hospitality Trust is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  220.00  in InnSuites Hospitality Trust on October 24, 2024 and sell it today you would earn a total of  36.50  from holding InnSuites Hospitality Trust or generate 16.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Sotherly Hotels PR  vs.  InnSuites Hospitality Trust

Sotherly Hotels PR

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sotherly Hotels PR are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sotherly Hotels is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

InnSuites Hospitality

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InnSuites Hospitality Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical indicators, InnSuites Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sotherly Hotels and InnSuites Hospitality

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

The idea behind Sotherly Hotels PR and InnSuites 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.

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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.