Correlation Between Sunstone Hotel and Xenia Hotels

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

Diversification Opportunities for Sunstone Hotel and Xenia Hotels

0.96

Correlation Coefficient

Sunstone Hotel  Xenia Hotels

Almost no diversification

The 3 months correlation between Sunstone and Xenia is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Xenia Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenia Hotels Resorts 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 Xenia Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenia Hotels Resorts has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Xenia Hotels go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Xenia Hotels

Assuming the 90 days horizon Sunstone Hotel Investors is expected to under-perform the Xenia Hotels. But the stock apears to be less risky and, when comparing its historical volatility, Sunstone Hotel Investors is 1.17 times less risky than Xenia Hotels. The stock trades about -0.25 of its potential returns per unit of risk. The Xenia Hotels Resorts is currently generating about -0.18 of returns per unit of risk over similar time horizon. If you would invest  1,388  in Xenia Hotels Resorts on December 30, 2024 and sell it today you would lose (278.00) from holding Xenia Hotels Resorts or give up 20.03% 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.  Xenia Hotels Resorts

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.

Xenia Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xenia Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's technical 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 Sunstone Hotel and Xenia Hotels

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

The idea behind Sunstone Hotel Investors and Xenia Hotels Resorts 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 Commodity Directory module to find actively traded commodities issued by global exchanges.