Correlation Between Ashford Hospitality and Piedmont Office

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

Diversification Opportunities for Ashford Hospitality and Piedmont Office

-0.32

Correlation Coefficient

Ashford Hospitality  Piedmont Office

Very good diversification

The 3 months correlation between Ashford and Piedmont is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Piedmont Office Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Piedmont Office Realty 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 Piedmont Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Piedmont Office Realty has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Piedmont Office go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Piedmont Office

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the Piedmont Office. In addition to that, Ashford Hospitality is 1.84 times more volatile than Piedmont Office Realty. It trades about -0.13 of its total potential returns per unit of risk. Piedmont Office Realty is currently generating about -0.08 per unit of volatility. If you would invest  997.00  in Piedmont Office Realty on August 30, 2024 and sell it today you would lose (29.00) from holding Piedmont Office Realty or give up 2.91% of portfolio value over 90 days.

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

Ashford Hospitality Trust  vs.  Piedmont Office Realty

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 latest fragile performance, the Preferred Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Piedmont Office Realty

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Piedmont Office Realty are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Piedmont Office is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ashford Hospitality and Piedmont Office

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

The idea behind Ashford Hospitality Trust and Piedmont Office Realty 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.