Correlation Between Modiv and Ascott Residence

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

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

Diversification Opportunities for Modiv and Ascott Residence

-0.29

Correlation Coefficient

Modiv  Ascott Residence

Very good diversification

The 3 months correlation between Modiv and Ascott is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Modiv Inc and Ascott Residence Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascott Residence Trust and Modiv 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 Modiv Inc are associated (or correlated) with Ascott Residence. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascott Residence Trust has no effect on the direction of Modiv i.e., Modiv and Ascott Residence go up and down completely randomly.

Pair Corralation between Modiv and Ascott Residence

Assuming the 90 days trading horizon Modiv is expected to generate 28.93 times less return on investment than Ascott Residence. But when comparing it to its historical volatility, Modiv Inc is 1.85 times less risky than Ascott Residence. It trades about 0.01 of its potential returns per unit of risk. Ascott Residence Trust is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Ascott Residence Trust on October 10, 2024 and sell it today you would earn a total of  7.00  from holding Ascott Residence Trust or generate 10.77% return on investment over 90 days.

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

Modiv Inc  vs.  Ascott Residence Trust

Modiv Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modiv Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Modiv is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Ascott Residence Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ascott Residence Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Ascott Residence may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Modiv and Ascott Residence

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

The idea behind Modiv Inc and Ascott Residence 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.