Correlation Between American Healthcare and Sotherly Hotels

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

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

Diversification Opportunities for American Healthcare and Sotherly Hotels

-0.63

Correlation Coefficient

American Healthcare  Sotherly Hotels

Excellent diversification

The 3 months correlation between American and Sotherly is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding American Healthcare REIT, and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and American Healthcare 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 American Healthcare REIT, 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 American Healthcare i.e., American Healthcare and Sotherly Hotels go up and down completely randomly.

Pair Corralation between American Healthcare and Sotherly Hotels

Considering the 90-day investment horizon American Healthcare REIT, is expected to generate 0.34 times more return on investment than Sotherly Hotels. However, American Healthcare REIT, is 2.93 times less risky than Sotherly Hotels. It trades about 0.17 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.02 per unit of risk. If you would invest  2,346  in American Healthcare REIT, on September 12, 2024 and sell it today you would earn a total of  440.00  from holding American Healthcare REIT, or generate 18.76% return on investment over 90 days.

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

American Healthcare REIT,  vs.  Sotherly Hotels

American Healthcare REIT,

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Healthcare REIT, are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal technical indicators, American Healthcare reported solid returns over the last few months and may actually be approaching a breakup point.

Sotherly Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with American Healthcare and Sotherly Hotels

The main advantage of trading using opposite American Healthcare and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Healthcare 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 American Healthcare REIT, 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.