Correlation Between Ashford Hospitality and Host Hotels

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

Diversification Opportunities for Ashford Hospitality and Host Hotels

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Ashford and Host is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Host Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Host Hotels Resorts 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 Host Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Host Hotels Resorts has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Host Hotels go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Host Hotels

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the Host Hotels. In addition to that, Ashford Hospitality is 1.45 times more volatile than Host Hotels Resorts. It trades about 0.0 of its total potential returns per unit of risk. Host Hotels Resorts is currently generating about 0.03 per unit of volatility. If you would invest  1,668  in Host Hotels Resorts on December 29, 2023 and sell it today you would earn a total of  393.00  from holding Host Hotels Resorts or generate 23.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Ashford Hospitality Trust  vs.  Host Hotels Resorts

 Performance 
       Timeline  
Ashford Hospitality Trust 

Risk-Adjusted Performance

5 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Ashford Hospitality may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Host Hotels Resorts 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Host Hotels Resorts are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Host Hotels may actually be approaching a critical reversion point that can send shares even higher in April 2024.

Ashford Hospitality and Host Hotels Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Ashford Hospitality and Host Hotels

The main advantage of trading using opposite Ashford Hospitality and Host Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashford Hospitality position performs unexpectedly, Host Hotels 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 Host Hotels will offset losses from the drop in Host Hotels' long position.
The idea behind Ashford Hospitality Trust and Host Hotels Resorts 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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