Correlation Between Ashford Hospitality and Net Lease

Can any of the company-specific risk be diversified away by investing in both Ashford Hospitality and Net Lease 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 Ashford Hospitality and Net Lease into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ashford Hospitality Trust and Net Lease Office, you can compare the effects of market volatilities on Ashford Hospitality and Net Lease 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 Ashford Hospitality with a short position of Net Lease. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashford Hospitality and Net Lease.

Diversification Opportunities for Ashford Hospitality and Net Lease

-0.2

Correlation Coefficient

Ashford Hospitality  Net Lease

Good diversification

The 3 months correlation between Ashford and Net is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Net Lease Office in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Net Lease Office and Ashford Hospitality 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 Ashford Hospitality Trust are associated (or correlated) with Net Lease. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Net Lease Office has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Net Lease go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Net Lease

Assuming the 90 days trading horizon Ashford Hospitality is expected to generate 1.53 times less return on investment than Net Lease. In addition to that, Ashford Hospitality is 1.19 times more volatile than Net Lease Office. It trades about 0.04 of its total potential returns per unit of risk. Net Lease Office is currently generating about 0.08 per unit of volatility. If you would invest  2,993  in Net Lease Office on October 24, 2024 and sell it today you would earn a total of  227.00  from holding Net Lease Office or generate 7.58% return on investment over 90 days.

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

Ashford Hospitality Trust  vs.  Net Lease Office

Ashford Hospitality Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Ashford Hospitality is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Net Lease Office

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Net Lease Office are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively abnormal basic indicators, Net Lease may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ashford Hospitality and Net Lease

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

The idea behind Ashford Hospitality Trust and Net Lease Office 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.

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 the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.