Correlation Between Sunstone Hotel and Braemar Hotels

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

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

Diversification Opportunities for Sunstone Hotel and Braemar Hotels

0.87

Correlation Coefficient

Sunstone Hotel  Braemar Hotels

Very poor diversification

The 3 months correlation between Sunstone and Braemar is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Braemar Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braemar Hotels Resorts and Sunstone Hotel 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 Sunstone Hotel Investors are associated (or correlated) with Braemar Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braemar Hotels Resorts has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Braemar Hotels go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Braemar Hotels

Assuming the 90 days trading horizon Sunstone Hotel is expected to generate 1.89 times less return on investment than Braemar Hotels. But when comparing it to its historical volatility, Sunstone Hotel Investors is 1.62 times less risky than Braemar Hotels. It trades about 0.12 of its potential returns per unit of risk. Braemar Hotels Resorts is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,831  in Braemar Hotels Resorts on August 29, 2024 and sell it today you would earn a total of  257.00  from holding Braemar Hotels Resorts or generate 14.04% return on investment over 90 days.

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

Sunstone Hotel Investors  vs.  Braemar Hotels Resorts

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.

Braemar Hotels Resorts

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotels Resorts are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Braemar Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunstone Hotel and Braemar Hotels

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

The idea behind Sunstone Hotel Investors and Braemar Hotels Resorts 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.