Correlation Between Ashford Hospitality and Diamondrock Hospitality

Can any of the company-specific risk be diversified away by investing in both Ashford Hospitality and Diamondrock 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 Ashford Hospitality and Diamondrock Hospitality 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 Diamondrock Hospitality, you can compare the effects of market volatilities on Ashford Hospitality and Diamondrock 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 Ashford Hospitality with a short position of Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashford Hospitality and Diamondrock Hospitality.

Diversification Opportunities for Ashford Hospitality and Diamondrock Hospitality

-0.75

Correlation Coefficient

Ashford Hospitality  Diamondrock Hospitality

Pay attention - limited upside

The 3 months correlation between Ashford and Diamondrock is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Diamondrock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality 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 Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Diamondrock Hospitality go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Diamondrock Hospitality

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 1.85 times more return on investment than Diamondrock Hospitality. However, Ashford Hospitality is 1.85 times more volatile than Diamondrock Hospitality. It trades about 0.15 of its potential returns per unit of risk. Diamondrock Hospitality is currently generating about -0.13 per unit of risk. If you would invest  1,255  in Ashford Hospitality Trust on December 23, 2024 and sell it today you would earn a total of  334.00  from holding Ashford Hospitality Trust or generate 26.61% 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.  Diamondrock Hospitality

Ashford Hospitality Trust

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Ashford Hospitality demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Diamondrock Hospitality

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamondrock Hospitality 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 basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Ashford Hospitality and Diamondrock Hospitality

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

The idea behind Ashford Hospitality Trust and Diamondrock Hospitality 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.