Correlation Between ASHFORD HOSPITTRUST and NRG Energy

Can any of the company-specific risk be diversified away by investing in both ASHFORD HOSPITTRUST and NRG Energy 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 HOSPITTRUST and NRG Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ASHFORD HOSPITTRUST and NRG Energy, you can compare the effects of market volatilities on ASHFORD HOSPITTRUST and NRG Energy 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 HOSPITTRUST with a short position of NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASHFORD HOSPITTRUST and NRG Energy.

Diversification Opportunities for ASHFORD HOSPITTRUST and NRG Energy

-0.4

Correlation Coefficient

ASHFORD HOSPITTRUST  NRG Energy

Very good diversification

The 3 months correlation between ASHFORD and NRG is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding ASHFORD HOSPITTRUST and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG Energy and ASHFORD HOSPITTRUST 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 HOSPITTRUST are associated (or correlated) with NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of ASHFORD HOSPITTRUST i.e., ASHFORD HOSPITTRUST and NRG Energy go up and down completely randomly.

Pair Corralation between ASHFORD HOSPITTRUST and NRG Energy

If you would invest  505.00  in ASHFORD HOSPITTRUST on October 1, 2024 and sell it today you would earn a total of  0.00  from holding ASHFORD HOSPITTRUST or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

ASHFORD HOSPITTRUST  vs.  NRG Energy

ASHFORD HOSPITTRUST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASHFORD HOSPITTRUST has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

NRG Energy

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRG Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, NRG Energy may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with ASHFORD HOSPITTRUST and NRG Energy

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

The idea behind ASHFORD HOSPITTRUST and NRG Energy 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.