Correlation Between Sunstone Hotel and Bunzl Plc

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

Diversification Opportunities for Sunstone Hotel and Bunzl Plc

0.24

Correlation Coefficient

Sunstone Hotel  Bunzl Plc

Modest diversification

The 3 months correlation between Sunstone and Bunzl is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Bunzl plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bunzl plc 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 Bunzl Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bunzl plc has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Bunzl Plc go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Bunzl Plc

Assuming the 90 days horizon Sunstone Hotel Investors is expected to generate 1.14 times more return on investment than Bunzl Plc. However, Sunstone Hotel is 1.14 times more volatile than Bunzl plc. It trades about 0.1 of its potential returns per unit of risk. Bunzl plc is currently generating about 0.07 per unit of risk. If you would invest  926.00  in Sunstone Hotel Investors on September 29, 2024 and sell it today you would earn a total of  214.00  from holding Sunstone Hotel Investors or generate 23.11% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  Bunzl plc

Sunstone Hotel Investors

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sunstone Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Bunzl plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bunzl plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Bunzl Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Sunstone Hotel and Bunzl Plc

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

The idea behind Sunstone Hotel Investors and Bunzl plc 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.

Check out your portfolio center.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.