Correlation Between Ashford Hospitality and LXP Industrial

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

Diversification Opportunities for Ashford Hospitality and LXP Industrial

0.75

Correlation Coefficient

Ashford Hospitality  LXP Industrial

Poor diversification

The 3 months correlation between Ashford and LXP is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and LXP Industrial Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LXP Industrial Trust 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 LXP Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LXP Industrial Trust has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and LXP Industrial go up and down completely randomly.

Pair Corralation between Ashford Hospitality and LXP Industrial

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the LXP Industrial. In addition to that, Ashford Hospitality is 2.76 times more volatile than LXP Industrial Trust. It trades about -0.06 of its total potential returns per unit of risk. LXP Industrial Trust is currently generating about -0.1 per unit of volatility. If you would invest  1,017  in LXP Industrial Trust on September 1, 2024 and sell it today you would lose (82.00) from holding LXP Industrial Trust or give up 8.06% 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.  LXP Industrial Trust

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 fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

LXP Industrial Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days LXP Industrial Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Ashford Hospitality and LXP Industrial

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

The idea behind Ashford Hospitality Trust and LXP Industrial Trust 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.

Check out your portfolio center.

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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.