Correlation Between Realty Income and Ashford Hospitality

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

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

Diversification Opportunities for Realty Income and Ashford Hospitality

-0.59

Correlation Coefficient

Realty Income  Ashford Hospitality

Excellent diversification

The 3 months correlation between Realty and Ashford is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income 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 Realty Income 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 Realty Income 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 Realty Income i.e., Realty Income and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Realty Income and Ashford Hospitality

Taking into account the 90-day investment horizon Realty Income is expected to under-perform the Ashford Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income is 5.89 times less risky than Ashford Hospitality. The stock trades about -0.15 of its potential returns per unit of risk. The Ashford Hospitality Trust is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  898.00  in Ashford Hospitality Trust on October 3, 2024 and sell it today you would lose (179.00) from holding Ashford Hospitality Trust or give up 19.93% of portfolio value over 90 days.

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

Realty Income  vs.  Ashford Hospitality Trust

Realty Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Realty Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Ashford Hospitality Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Ashford Hospitality may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Realty Income and Ashford Hospitality

The main advantage of trading using opposite Realty Income and Ashford Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Realty Income 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 Realty Income 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.