Correlation Between Sunstone Hotel and Humana

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

Diversification Opportunities for Sunstone Hotel and Humana

0.3

Correlation Coefficient

Sunstone Hotel  Humana

Weak diversification

The 3 months correlation between Sunstone and Humana is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Humana Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Humana Inc 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 Humana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Humana Inc has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Humana go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Humana

Assuming the 90 days horizon Sunstone Hotel Investors is expected to generate 0.7 times more return on investment than Humana. However, Sunstone Hotel Investors is 1.42 times less risky than Humana. It trades about 0.05 of its potential returns per unit of risk. Humana Inc is currently generating about -0.04 per unit of risk. If you would invest  844.00  in Sunstone Hotel Investors on September 16, 2024 and sell it today you would earn a total of  316.00  from holding Sunstone Hotel Investors or generate 37.44% 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.  Humana Inc

Sunstone Hotel Investors

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 15 (%) 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.

Humana Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sunstone Hotel and Humana

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

The idea behind Sunstone Hotel Investors and Humana Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.