Correlation Between Sunstone Hotel and Five Below

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

Diversification Opportunities for Sunstone Hotel and Five Below

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Sunstone and Five Below is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors and Five Below in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Below 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 Five Below. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Below has no effect on the direction of Sunstone Hotel i.e., Sunstone Hotel and Five Below go up and down completely randomly.

Pair Corralation between Sunstone Hotel and Five Below

Considering the 90-day investment horizon Sunstone Hotel is expected to generate 3.71 times less return on investment than Five Below. But when comparing it to its historical volatility, Sunstone Hotel Investors is 2.1 times less risky than Five Below. It trades about 0.13 of its potential returns per unit of risk. Five Below is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  14,810  in Five Below on September 4, 2022 and sell it today you would earn a total of  3,606  from holding Five Below or generate 24.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sunstone Hotel Investors  vs.  Five Below

 Performance (%) 
       Timeline  
Sunstone Hotel Investors 
Sunstone Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Sunstone Hotel Investors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical indicators, Sunstone Hotel is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.

Sunstone Price Channel

Five Below 
Five Below Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Five Below are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Five Below exhibited solid returns over the last few months and may actually be approaching a breakup point.

Five Below Price Channel

Sunstone Hotel and Five Below Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sunstone Hotel and Five Below

The main advantage of trading using opposite Sunstone Hotel and Five Below positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel position performs unexpectedly, Five Below 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 Five Below will offset losses from the drop in Five Below's long position.
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The idea behind Sunstone Hotel Investors and Five Below 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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Check out your portfolio center. 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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