Correlation Between Ashford Hospitality and Whitestone REIT

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

Diversification Opportunities for Ashford Hospitality and Whitestone REIT

-0.08

Correlation Coefficient

Ashford Hospitality  Whitestone REIT

Good diversification

The 3 months correlation between Ashford and Whitestone is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Whitestone REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whitestone REIT 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 Whitestone REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whitestone REIT has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Whitestone REIT go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Whitestone REIT

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 1.46 times more return on investment than Whitestone REIT. However, Ashford Hospitality is 1.46 times more volatile than Whitestone REIT. It trades about 0.33 of its potential returns per unit of risk. Whitestone REIT is currently generating about 0.05 per unit of risk. If you would invest  1,381  in Ashford Hospitality Trust on December 22, 2024 and sell it today you would earn a total of  579.00  from holding Ashford Hospitality Trust or generate 41.93% 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.  Whitestone REIT

Ashford Hospitality Trust

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Ashford Hospitality exhibited solid returns over the last few months and may actually be approaching a breakup point.

Whitestone REIT

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Whitestone REIT are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Whitestone REIT is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ashford Hospitality and Whitestone REIT

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

The idea behind Ashford Hospitality Trust and Whitestone REIT 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.