Correlation Between Ashford Hospitality and Riocan REIT

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

Diversification Opportunities for Ashford Hospitality and Riocan REIT

0.74

Correlation Coefficient

Ashford Hospitality  Riocan REIT

Poor diversification

The 3 months correlation between Ashford and Riocan is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Riocan REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riocan 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 Riocan REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riocan REIT has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Riocan REIT go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Riocan REIT

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 2.37 times more return on investment than Riocan REIT. However, Ashford Hospitality is 2.37 times more volatile than Riocan REIT. It trades about -0.07 of its potential returns per unit of risk. Riocan REIT is currently generating about -0.19 per unit of risk. If you would invest  1,703  in Ashford Hospitality Trust on September 13, 2024 and sell it today you would lose (246.00) from holding Ashford Hospitality Trust or give up 14.45% of portfolio value over 90 days.

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

Ashford Hospitality Trust  vs.  Riocan 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 fragile performance in the last few months, the Preferred Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Riocan REIT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Riocan REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's fundamental 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.

Pair Trading with Ashford Hospitality and Riocan REIT

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

The idea behind Ashford Hospitality Trust and Riocan 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.