Correlation Between Sunstone Hotel and CHRYSALIS INVESTMENTS

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

Diversification Opportunities for Sunstone Hotel and CHRYSALIS INVESTMENTS

0.75

Correlation Coefficient

Sunstone Hotel  CHRYSALIS INVESTMENTS

Poor diversification

The 3 months correlation between Sunstone and CHRYSALIS is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and CHRYSALIS INVESTMENTS LTD in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHRYSALIS INVESTMENTS LTD 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 CHRYSALIS INVESTMENTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHRYSALIS INVESTMENTS LTD has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and CHRYSALIS INVESTMENTS go up and down completely randomly.

Pair Corralation between Sunstone Hotel and CHRYSALIS INVESTMENTS

Assuming the 90 days horizon Sunstone Hotel Investors is expected to generate 1.19 times more return on investment than CHRYSALIS INVESTMENTS. However, Sunstone Hotel is 1.19 times more volatile than CHRYSALIS INVESTMENTS LTD. It trades about 0.21 of its potential returns per unit of risk. CHRYSALIS INVESTMENTS LTD is currently generating about 0.14 per unit of risk. If you would invest  918.00  in Sunstone Hotel Investors on October 10, 2024 and sell it today you would earn a total of  242.00  from holding Sunstone Hotel Investors or generate 26.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.33%
Values	Daily Returns

Sunstone Hotel Investors  vs.  CHRYSALIS INVESTMENTS LTD

Sunstone Hotel Investors

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Sunstone Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

CHRYSALIS INVESTMENTS LTD

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CHRYSALIS INVESTMENTS LTD are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, CHRYSALIS INVESTMENTS reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunstone Hotel and CHRYSALIS INVESTMENTS

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

The idea behind Sunstone Hotel Investors and CHRYSALIS INVESTMENTS LTD 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.