Correlation Between Sunstone Hotel and NetSol Technologies

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

Diversification Opportunities for Sunstone Hotel and NetSol Technologies

-0.37

Correlation Coefficient

Sunstone Hotel  NetSol Technologies

Very good diversification

The 3 months correlation between Sunstone and NetSol is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and NetSol Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NetSol Technologies 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 NetSol Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NetSol Technologies has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and NetSol Technologies go up and down completely randomly.

Pair Corralation between Sunstone Hotel and NetSol Technologies

Assuming the 90 days horizon Sunstone Hotel is expected to generate 116.69 times less return on investment than NetSol Technologies. But when comparing it to its historical volatility, Sunstone Hotel Investors is 2.89 times less risky than NetSol Technologies. It trades about 0.0 of its potential returns per unit of risk. NetSol Technologies is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  248.00  in NetSol Technologies on October 5, 2024 and sell it today you would earn a total of  6.00  from holding NetSol Technologies or generate 2.42% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  NetSol Technologies

Sunstone Hotel Investors

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Sunstone Hotel Investors has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Sunstone Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

NetSol Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Sunstone Hotel and NetSol Technologies

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

The idea behind Sunstone Hotel Investors and NetSol Technologies 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.