Correlation Between Sunstone Hotel and Service Properties

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

Diversification Opportunities for Sunstone Hotel and Service Properties

0.13

Correlation Coefficient

Sunstone Hotel  Service Properties

Average diversification

The 3 months correlation between Sunstone and Service is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Service Properties go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Service Properties

Assuming the 90 days horizon Sunstone Hotel Investors is expected to under-perform the Service Properties. But the stock apears to be less risky and, when comparing its historical volatility, Sunstone Hotel Investors is 2.5 times less risky than Service Properties. The stock trades about -0.25 of its potential returns per unit of risk. The Service Properties Trust is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  236.00  in Service Properties Trust on December 30, 2024 and sell it today you would earn a total of  4.00  from holding Service Properties Trust or generate 1.69% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  Service Properties Trust

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.

Service Properties Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Service Properties Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Service Properties may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sunstone Hotel and Service Properties

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

The idea behind Sunstone Hotel Investors and Service Properties 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..