Correlation Between Apple Hospitality and Ashford Hospitality

Can any of the company-specific risk be diversified away by investing in both Apple Hospitality and Ashford Hospitality 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 Apple Hospitality and Ashford Hospitality into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Apple Hospitality REIT and Ashford Hospitality Trust, you can compare the effects of market volatilities on Apple Hospitality and Ashford Hospitality 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 Apple Hospitality with a short position of Ashford Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple Hospitality and Ashford Hospitality.

Diversification Opportunities for Apple Hospitality and Ashford Hospitality

-0.59

Correlation Coefficient

Apple Hospitality  Ashford Hospitality

Excellent diversification

The 3 months correlation between Apple and Ashford is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Apple Hospitality REIT and Ashford Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashford Hospitality Trust and Apple 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 Apple Hospitality REIT are associated (or correlated) with Ashford Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashford Hospitality Trust has no effect on the direction of Apple Hospitality i.e., Apple Hospitality and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Apple Hospitality and Ashford Hospitality

Given the investment horizon of 90 days Apple Hospitality REIT is expected to generate 0.45 times more return on investment than Ashford Hospitality. However, Apple Hospitality REIT is 2.23 times less risky than Ashford Hospitality. It trades about 0.14 of its potential returns per unit of risk. Ashford Hospitality Trust is currently generating about -0.03 per unit of risk. If you would invest  1,429  in Apple Hospitality REIT on August 30, 2024 and sell it today you would earn a total of  191.00  from holding Apple Hospitality REIT or generate 13.37% return on investment over 90 days.

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

Apple Hospitality REIT  vs.  Ashford Hospitality Trust

Apple Hospitality REIT

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Hospitality REIT are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Apple Hospitality exhibited solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Apple Hospitality and Ashford Hospitality

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

The idea behind Apple Hospitality REIT and Ashford Hospitality 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.