Correlation Between Sunstone Hotel and Levi Strauss

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

Diversification Opportunities for Sunstone Hotel and Levi Strauss

0.04

Correlation Coefficient

Sunstone Hotel  Levi Strauss

Significant diversification

The 3 months correlation between Sunstone and Levi is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Levi Strauss Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Levi Strauss 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 Levi Strauss. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Levi Strauss has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Levi Strauss go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Levi Strauss

Assuming the 90 days horizon Sunstone Hotel is expected to generate 1.04 times less return on investment than Levi Strauss. But when comparing it to its historical volatility, Sunstone Hotel Investors is 1.4 times less risky than Levi Strauss. It trades about 0.04 of its potential returns per unit of risk. Levi Strauss Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,379  in Levi Strauss Co on October 11, 2024 and sell it today you would earn a total of  358.00  from holding Levi Strauss Co or generate 25.96% 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.  Levi Strauss Co

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.

Levi Strauss

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Levi Strauss Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Levi Strauss 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 Levi Strauss

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

The idea behind Sunstone Hotel Investors and Levi Strauss Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.