Correlation Between TotalEnergies and Sunstone Hotel

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

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

Diversification Opportunities for TotalEnergies and Sunstone Hotel

-0.44

Correlation Coefficient

TotalEnergies  Sunstone Hotel

Very good diversification

The 3 months correlation between TotalEnergies and Sunstone is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding TotalEnergies SE and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors and TotalEnergies 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 TotalEnergies SE are associated (or correlated) with Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of TotalEnergies i.e., TotalEnergies and Sunstone Hotel go up and down completely randomly.

Pair Corralation between TotalEnergies and Sunstone Hotel

Assuming the 90 days trading horizon TotalEnergies is expected to generate 1.12 times less return on investment than Sunstone Hotel. But when comparing it to its historical volatility, TotalEnergies SE is 1.21 times less risky than Sunstone Hotel. It trades about 0.03 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  842.00  in Sunstone Hotel Investors on December 5, 2024 and sell it today you would earn a total of  153.00  from holding Sunstone Hotel Investors or generate 18.17% return on investment over 90 days.

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

TotalEnergies SE  vs.  Sunstone Hotel Investors

TotalEnergies SE

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TotalEnergies SE are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TotalEnergies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with TotalEnergies and Sunstone Hotel

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

The idea behind TotalEnergies SE and Sunstone Hotel Investors 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 Anywhere module to track or share privately all of your investments from the convenience of any device.