Correlation Between Sotherly Hotels and OSRAM LICHT

Can any of the company-specific risk be diversified away by investing in both Sotherly Hotels and OSRAM LICHT 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 Sotherly Hotels and OSRAM LICHT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sotherly Hotels and OSRAM LICHT N, you can compare the effects of market volatilities on Sotherly Hotels and OSRAM LICHT 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 Sotherly Hotels with a short position of OSRAM LICHT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotherly Hotels and OSRAM LICHT.

Diversification Opportunities for Sotherly Hotels and OSRAM LICHT

0.11

Correlation Coefficient

Sotherly Hotels  OSRAM LICHT

Average diversification

The 3 months correlation between Sotherly and OSRAM is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels and OSRAM LICHT N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OSRAM LICHT N and Sotherly Hotels 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 Sotherly Hotels are associated (or correlated) with OSRAM LICHT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OSRAM LICHT N has no effect on the direction of Sotherly Hotels i.e., Sotherly Hotels and OSRAM LICHT go up and down completely randomly.

Pair Corralation between Sotherly Hotels and OSRAM LICHT

Assuming the 90 days horizon Sotherly Hotels is expected to generate 13.23 times more return on investment than OSRAM LICHT. However, Sotherly Hotels is 13.23 times more volatile than OSRAM LICHT N. It trades about 0.01 of its potential returns per unit of risk. OSRAM LICHT N is currently generating about 0.09 per unit of risk. If you would invest  69.00  in Sotherly Hotels on May 13, 2025 and sell it today you would lose (1.00) from holding Sotherly Hotels or give up 1.45% of portfolio value over 90 days.

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

Sotherly Hotels  vs.  OSRAM LICHT N

Sotherly Hotels

Risk-Adjusted Performance

Weakest

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

OSRAM LICHT N

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in OSRAM LICHT N are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, OSRAM LICHT is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sotherly Hotels and OSRAM LICHT

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

The idea behind Sotherly Hotels and OSRAM LICHT N 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.