Correlation Between Office Properties and Hersha Hospitality

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

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

Diversification Opportunities for Office Properties and Hersha Hospitality

-0.43

Correlation Coefficient

Office Properties  Hersha Hospitality

Very good diversification

The 3 months correlation between Office and Hersha is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Office Properties Income and Hersha Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hersha Hospitality Trust and Office Properties 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 Office Properties Income are associated (or correlated) with Hersha Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hersha Hospitality Trust has no effect on the direction of Office Properties i.e., Office Properties and Hersha Hospitality go up and down completely randomly.

Pair Corralation between Office Properties and Hersha Hospitality

If you would invest  1,255  in Office Properties Income on September 2, 2024 and sell it today you would lose (30.00) from holding Office Properties Income or give up 2.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Office Properties Income  vs.  Hersha Hospitality Trust

Office Properties Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Office Properties Income has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Office Properties is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Hersha Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

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 new stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Office Properties and Hersha Hospitality

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

The idea behind Office Properties Income and Hersha 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.