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 Corp 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

-0.17

Correlation Coefficient

Realty Income  Ashford Hospitality

Good diversification

The 3 months correlation between Realty and Ashford is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Realty Income Corp 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 Corp 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 Corp is expected to under-perform the Ashford Hospitality. But the stock apears to be less risky and, when comparing its historical volatility, Realty Income Corp is 2.2 times less risky than Ashford Hospitality. The stock trades about 0.0 of its potential returns per unit of risk. The Ashford Hospitality Trust is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  1,670  in Ashford Hospitality Trust on January 31, 2024 and sell it today you would lose (260.00) from holding Ashford Hospitality Trust or give up 15.57% of portfolio value over 90 days.

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

Realty Income Corp  vs.  Ashford Hospitality Trust

Realty me Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Realty Income Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Realty Income is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Ashford Hospitality Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Ashford Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

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 Corp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.