Correlation Between Ashford Hospitality and Douglas Emmett

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

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

Diversification Opportunities for Ashford Hospitality and Douglas Emmett

-0.7

Correlation Coefficient

Ashford Hospitality  Douglas Emmett

Excellent diversification

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

Pair Corralation between Ashford Hospitality and Douglas Emmett

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 0.87 times more return on investment than Douglas Emmett. However, Ashford Hospitality Trust is 1.15 times less risky than Douglas Emmett. It trades about 0.26 of its potential returns per unit of risk. Douglas Emmett is currently generating about -0.11 per unit of risk. If you would invest  1,430  in Ashford Hospitality Trust on November 28, 2024 and sell it today you would earn a total of  463.00  from holding Ashford Hospitality Trust or generate 32.38% return on investment over 90 days.

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

Ashford Hospitality Trust  vs.  Douglas Emmett

Ashford Hospitality Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Ashford Hospitality exhibited solid returns over the last few months and may actually be approaching a breakup point.

Douglas Emmett

Risk-Adjusted Performance

Very Weak

Over the last 90 days Douglas Emmett has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ashford Hospitality and Douglas Emmett

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

The idea behind Ashford Hospitality Trust and Douglas Emmett 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.