Correlation Between Ashford Hospitality and Service Properties

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

Diversification Opportunities for Ashford Hospitality and Service Properties

-0.57

Correlation Coefficient

Ashford Hospitality  Service Properties

Excellent diversification

The 3 months correlation between Ashford and Service is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Service Properties go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Service Properties

Considering the 90-day investment horizon Ashford Hospitality Trust is expected to under-perform the Service Properties. In addition to that, Ashford Hospitality is 1.03 times more volatile than Service Properties Trust. It trades about -0.19 of its total potential returns per unit of risk. Service Properties Trust is currently generating about -0.11 per unit of volatility. If you would invest  274.00  in Service Properties Trust on October 6, 2024 and sell it today you would lose (23.00) from holding Service Properties Trust or give up 8.39% of portfolio value over 90 days.

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

Ashford Hospitality Trust  vs.  Service Properties Trust

Ashford Hospitality Trust

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Ashford Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Service Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Service Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ashford Hospitality and Service Properties

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

The idea behind Ashford Hospitality Trust and Service Properties 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.

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.