Correlation Between Hersha Hospitality and Healthcare Realty

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Can any of the company-specific risk be diversified away by investing in both Hersha Hospitality and Healthcare Realty 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 Hersha Hospitality and Healthcare Realty into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hersha Hospitality Trust and Healthcare Realty Trust, you can compare the effects of market volatilities on Hersha Hospitality and Healthcare Realty 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 Hersha Hospitality with a short position of Healthcare Realty. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hersha Hospitality and Healthcare Realty.

Diversification Opportunities for Hersha Hospitality and Healthcare Realty

-0.28
  Correlation Coefficient

Very good diversification

The 3 months correlation between Hersha and Healthcare is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Hersha Hospitality Trust and Healthcare Realty Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Healthcare Realty Trust and Hersha 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 Hersha Hospitality Trust are associated (or correlated) with Healthcare Realty. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Healthcare Realty Trust has no effect on the direction of Hersha Hospitality i.e., Hersha Hospitality and Healthcare Realty go up and down completely randomly.

Pair Corralation between Hersha Hospitality and Healthcare Realty

Allowing for the 90-day total investment horizon Hersha Hospitality Trust is expected to generate 2.07 times more return on investment than Healthcare Realty. However, Hersha Hospitality is 2.07 times more volatile than Healthcare Realty Trust. It trades about 0.03 of its potential returns per unit of risk. Healthcare Realty Trust is currently generating about -0.05 per unit of risk. If you would invest  757.00  in Hersha Hospitality Trust on December 29, 2023 and sell it today you would earn a total of  242.00  from holding Hersha Hospitality Trust or generate 31.97% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy83.4%
ValuesDaily Returns

Hersha Hospitality Trust  vs.  Healthcare Realty Trust

 Performance 
       Timeline  
Hersha Hospitality Trust 

Risk-Adjusted Performance

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Over the last 90 days Hersha Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Hersha Hospitality is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Healthcare Realty Trust 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Healthcare Realty Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Hersha Hospitality and Healthcare Realty Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Hersha Hospitality and Healthcare Realty

The main advantage of trading using opposite Hersha Hospitality and Healthcare Realty positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hersha Hospitality position performs unexpectedly, Healthcare Realty 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 Healthcare Realty will offset losses from the drop in Healthcare Realty's long position.
The idea behind Hersha Hospitality Trust and Healthcare Realty 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.

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