Correlation Between OSRAM LICHT and Sotherly Hotels

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

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

Diversification Opportunities for OSRAM LICHT and Sotherly Hotels

-0.03

Correlation Coefficient

OSRAM LICHT  Sotherly Hotels

Good diversification

The 3 months correlation between OSRAM and Sotherly is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding OSRAM LICHT N and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and OSRAM LICHT 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 OSRAM LICHT N 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 OSRAM LICHT i.e., OSRAM LICHT and Sotherly Hotels go up and down completely randomly.

Pair Corralation between OSRAM LICHT and Sotherly Hotels

Assuming the 90 days trading horizon OSRAM LICHT is expected to generate 1.7 times less return on investment than Sotherly Hotels. But when comparing it to its historical volatility, OSRAM LICHT N is 13.34 times less risky than Sotherly Hotels. It trades about 0.09 of its potential returns per unit of risk. Sotherly Hotels is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  69.00  in Sotherly Hotels on May 14, 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 Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

OSRAM LICHT N  vs.  Sotherly Hotels

OSRAM LICHT N

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in OSRAM LICHT N are ranked lower than 6 (%) 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.

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.

Pair Trading with OSRAM LICHT and Sotherly Hotels

The main advantage of trading using opposite OSRAM LICHT and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if OSRAM LICHT 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 OSRAM LICHT N 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.