Correlation Between Sunstone Hotel and Zeon

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

Diversification Opportunities for Sunstone Hotel and Zeon

0.68

Correlation Coefficient

Sunstone Hotel  Zeon

Poor diversification

The 3 months correlation between Sunstone and Zeon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Zeon Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeon 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 Zeon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeon has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Zeon go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Zeon

Assuming the 90 days horizon Sunstone Hotel Investors is expected to generate 0.73 times more return on investment than Zeon. However, Sunstone Hotel Investors is 1.37 times less risky than Zeon. It trades about 0.04 of its potential returns per unit of risk. Zeon Corporation is currently generating about 0.01 per unit of risk. If you would invest  870.00  in Sunstone Hotel Investors on October 11, 2024 and sell it today you would earn a total of  290.00  from holding Sunstone Hotel Investors or generate 33.33% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  Zeon Corp.

Sunstone Hotel Investors

Risk-Adjusted Performance

15 of 100

Solid

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 uncertain basic indicators, Sunstone Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Zeon

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Zeon Corporation are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Zeon may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Sunstone Hotel and Zeon

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

The idea behind Sunstone Hotel Investors and Zeon Corporation 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.