Correlation Between Aspen Digital and Sunstone Hotel

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

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

Diversification Opportunities for Aspen Digital and Sunstone Hotel

0.55

Correlation Coefficient

Aspen Digital  Sunstone Hotel

Very weak diversification

The 3 months correlation between Aspen and Sunstone is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Digital 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 Aspen Digital 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 Aspen Digital 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 Aspen Digital i.e., Aspen Digital and Sunstone Hotel go up and down completely randomly.

Pair Corralation between Aspen Digital and Sunstone Hotel

Given the investment horizon of 90 days Aspen Digital is expected to generate 0.36 times more return on investment than Sunstone Hotel. However, Aspen Digital is 2.81 times less risky than Sunstone Hotel. It trades about 0.06 of its potential returns per unit of risk. Sunstone Hotel Investors is currently generating about -0.01 per unit of risk. If you would invest  335.00  in Aspen Digital on August 29, 2024 and sell it today you would earn a total of  2.00  from holding Aspen Digital or generate 0.6% return on investment over 90 days.

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

Aspen Digital  vs.  Sunstone Hotel Investors

Aspen Digital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Digital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Aspen Digital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Despite fairly inconsistent basic indicators, Sunstone Hotel may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Aspen Digital and Sunstone Hotel

The main advantage of trading using opposite Aspen Digital and Sunstone Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Digital 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 Aspen Digital 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.