Correlation Between Ashford Hospitality and New England

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

Diversification Opportunities for Ashford Hospitality and New England

0.52

Correlation Coefficient

Ashford Hospitality  New England

Very weak diversification

The 3 months correlation between Ashford and New is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and New England Realty in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New England Realty 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 New England. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New England Realty has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and New England go up and down completely randomly.

Pair Corralation between Ashford Hospitality and New England

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 0.83 times more return on investment than New England. However, Ashford Hospitality Trust is 1.21 times less risky than New England. It trades about 0.12 of its potential returns per unit of risk. New England Realty is currently generating about -0.09 per unit of risk. If you would invest  1,353  in Ashford Hospitality Trust on November 28, 2024 and sell it today you would earn a total of  253.00  from holding Ashford Hospitality Trust or generate 18.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	25.42%
Values	Daily Returns

Ashford Hospitality Trust  vs.  New England Realty

Ashford Hospitality Trust

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 9 (%) 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.

New England Realty

Risk-Adjusted Performance

Very Weak

Over the last 90 days New England Realty has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ashford Hospitality and New England

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

The idea behind Ashford Hospitality Trust and New England Realty 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.