Correlation Between Ashford Hospitality and Ventas

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

Diversification Opportunities for Ashford Hospitality and Ventas

0.66

Correlation Coefficient

Ashford Hospitality  Ventas

Poor diversification

The 3 months correlation between Ashford and Ventas is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Ventas Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ventas Inc 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 Ventas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ventas Inc has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Ventas go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Ventas

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 1.05 times more return on investment than Ventas. However, Ashford Hospitality is 1.05 times more volatile than Ventas Inc. It trades about 0.32 of its potential returns per unit of risk. Ventas Inc is currently generating about 0.22 per unit of risk. If you would invest  1,405  in Ashford Hospitality Trust on November 28, 2024 and sell it today you would earn a total of  233.00  from holding Ashford Hospitality Trust or generate 16.58% return on investment over 90 days.

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

Ashford Hospitality Trust  vs.  Ventas Inc

Ashford Hospitality Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Ashford Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

Ventas Inc

Risk-Adjusted Performance

Modest

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

Pair Trading with Ashford Hospitality and Ventas

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

The idea behind Ashford Hospitality Trust and Ventas Inc 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.