Correlation Between Wheeler Real and Sotherly Hotels

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

Diversification Opportunities for Wheeler Real and Sotherly Hotels

0.72

Correlation Coefficient

Wheeler Real  Sotherly Hotels

Poor diversification

The 3 months correlation between Wheeler and Sotherly is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Wheeler Real Estate and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels 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 Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of Wheeler Real i.e., Wheeler Real and Sotherly Hotels go up and down completely randomly.

Pair Corralation between Wheeler Real and Sotherly Hotels

Given the investment horizon of 90 days Wheeler Real Estate is expected to under-perform the Sotherly Hotels. In addition to that, Wheeler Real is 1.52 times more volatile than Sotherly Hotels. It trades about -0.33 of its total potential returns per unit of risk. Sotherly Hotels is currently generating about -0.02 per unit of volatility. If you would invest  110.00  in Sotherly Hotels on October 9, 2024 and sell it today you would lose (15.00) from holding Sotherly Hotels or give up 13.64% of portfolio value over 90 days.

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

Wheeler Real Estate  vs.  Sotherly Hotels

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 conflicting 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.

Sotherly Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Wheeler Real and Sotherly Hotels

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

The idea behind Wheeler Real Estate and Sotherly Hotels 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.