Correlation Between Aspen Digital and Ashford Hospitality

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

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

Diversification Opportunities for Aspen Digital and Ashford Hospitality

-0.27

Correlation Coefficient

Aspen Digital  Ashford Hospitality

Very good diversification

The 3 months correlation between Aspen and Ashford is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Digital and Ashford Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashford Hospitality Trust and Aspen Digital 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 Aspen Digital are associated (or correlated) with Ashford Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashford Hospitality Trust has no effect on the direction of Aspen Digital i.e., Aspen Digital and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Aspen Digital and Ashford Hospitality

Given the investment horizon of 90 days Aspen Digital is expected to under-perform the Ashford Hospitality. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aspen Digital is 2.48 times less risky than Ashford Hospitality. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Ashford Hospitality Trust is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,274  in Ashford Hospitality Trust on December 30, 2024 and sell it today you would earn a total of  290.00  from holding Ashford Hospitality Trust or generate 22.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Aspen Digital  vs.  Ashford Hospitality Trust

Aspen Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aspen Digital 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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 nearly inconsistent basic indicators, Ashford Hospitality reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aspen Digital and Ashford Hospitality

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

The idea behind Aspen Digital and Ashford Hospitality Trust 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.