Correlation Between Ashford Hospitality and Global Healthcare

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

Diversification Opportunities for Ashford Hospitality and Global Healthcare

0.22

Correlation Coefficient

Ashford Hospitality  Global Healthcare

Modest diversification

The 3 months correlation between Ashford and Global is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Global Healthcare REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Healthcare 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 Global Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Healthcare REIT has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Global Healthcare go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Global Healthcare

Assuming the 90 days trading horizon Ashford Hospitality is expected to generate 16.12 times less return on investment than Global Healthcare. But when comparing it to its historical volatility, Ashford Hospitality Trust is 6.55 times less risky than Global Healthcare. It trades about 0.02 of its potential returns per unit of risk. Global Healthcare REIT is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  500.00  in Global Healthcare REIT on September 4, 2024 and sell it today you would lose (330.00) from holding Global Healthcare REIT or give up 66.0% of portfolio value over 90 days.

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

Ashford Hospitality Trust  vs.  Global Healthcare REIT

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. Despite unsteady performance in the last few months, the Preferred Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Global Healthcare REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global Healthcare REIT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Global Healthcare is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Ashford Hospitality and Global Healthcare

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

The idea behind Ashford Hospitality Trust and Global Healthcare 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.