Correlation Between Wheeler Real and Sunstone Hotel

Can any of the company-specific risk be diversified away by investing in both Wheeler Real and Sunstone Hotel 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 Wheeler Real and Sunstone Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Wheeler Real Estate and Sunstone Hotel Investors, you can compare the effects of market volatilities on Wheeler Real and Sunstone Hotel 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 Wheeler Real with a short position of Sunstone Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Wheeler Real and Sunstone Hotel.

Diversification Opportunities for Wheeler Real and Sunstone Hotel

-0.77

Correlation Coefficient

Wheeler Real  Sunstone Hotel

Pay attention - limited upside

The 3 months correlation between Wheeler and Sunstone is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Wheeler Real Estate and Sunstone Hotel Investors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunstone Hotel Investors and Wheeler Real 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 Wheeler Real Estate are associated (or correlated) with Sunstone Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunstone Hotel Investors has no effect on the direction of Wheeler Real i.e., Wheeler Real and Sunstone Hotel go up and down completely randomly.

Pair Corralation between Wheeler Real and Sunstone Hotel

Given the investment horizon of 90 days Wheeler Real Estate is expected to under-perform the Sunstone Hotel. In addition to that, Wheeler Real is 12.27 times more volatile than Sunstone Hotel Investors. It trades about -0.02 of its total potential returns per unit of risk. Sunstone Hotel Investors is currently generating about 0.04 per unit of volatility. If you would invest  940.00  in Sunstone Hotel Investors on October 4, 2024 and sell it today you would earn a total of  244.00  from holding Sunstone Hotel Investors or generate 25.96% return on investment over 90 days.

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

Wheeler Real Estate  vs.  Sunstone Hotel Investors

Wheeler Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Wheeler Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Sunstone Hotel Investors

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical indicators, Sunstone Hotel displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wheeler Real and Sunstone Hotel

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

The idea behind Wheeler Real Estate and Sunstone Hotel Investors 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.