Correlation Between DRI Healthcare and American Hotel

Can any of the company-specific risk be diversified away by investing in both DRI Healthcare and American Hotel 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 DRI Healthcare and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for DRI Healthcare and American Hotel

-0.7

Correlation Coefficient

DRI Healthcare  American Hotel

Excellent diversification

The 3 months correlation between DRI and American is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding DRI Healthcare Trust and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and DRI Healthcare 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 DRI Healthcare Trust are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of DRI Healthcare i.e., DRI Healthcare and American Hotel go up and down completely randomly.

Pair Corralation between DRI Healthcare and American Hotel

Assuming the 90 days trading horizon DRI Healthcare Trust is expected to generate 0.45 times more return on investment than American Hotel. However, DRI Healthcare Trust is 2.23 times less risky than American Hotel. It trades about 0.24 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.04 per unit of risk. If you would invest  813.00  in DRI Healthcare Trust on May 5, 2025 and sell it today you would earn a total of  212.00  from holding DRI Healthcare Trust or generate 26.08% return on investment over 90 days.

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

DRI Healthcare Trust  vs.  American Hotel Income

DRI Healthcare Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DRI Healthcare Trust are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, DRI Healthcare unveiled solid returns over the last few months and may actually be approaching a breakup point.

American Hotel Income

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Hotel Income has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with DRI Healthcare and American Hotel

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

The idea behind DRI Healthcare Trust and American Hotel Income 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.