Correlation Between Ashford Hospitality and Welltower

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

Diversification Opportunities for Ashford Hospitality and Welltower

-0.36

Correlation Coefficient

Ashford Hospitality  Welltower

Very good diversification

The 3 months correlation between Ashford and Welltower is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Welltower in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Welltower 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 Welltower. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Welltower has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Welltower go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Welltower

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the Welltower. In addition to that, Ashford Hospitality is 2.21 times more volatile than Welltower. It trades about -0.03 of its total potential returns per unit of risk. Welltower is currently generating about 0.19 per unit of volatility. If you would invest  12,009  in Welltower on August 30, 2024 and sell it today you would earn a total of  1,921  from holding Welltower or generate 16.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ashford Hospitality Trust  vs.  Welltower

Ashford Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashford Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Welltower

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Welltower are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Welltower disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ashford Hospitality and Welltower

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

The idea behind Ashford Hospitality Trust and Welltower 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.