Correlation Between Crombie Real and Ashford Hospitality

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

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

Diversification Opportunities for Crombie Real and Ashford Hospitality

0.58

Correlation Coefficient

Crombie Real  Ashford Hospitality

Very weak diversification

The 3 months correlation between Crombie and Ashford is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Crombie Real Estate 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 Crombie Real 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 Crombie Real Estate 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 Crombie Real i.e., Crombie Real and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Crombie Real and Ashford Hospitality

Assuming the 90 days horizon Crombie Real Estate is expected to under-perform the Ashford Hospitality. But the pink sheet apears to be less risky and, when comparing its historical volatility, Crombie Real Estate is 2.3 times less risky than Ashford Hospitality. The pink sheet trades about -0.21 of its potential returns per unit of risk. The Ashford Hospitality Trust is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  1,648  in Ashford Hospitality Trust on September 14, 2024 and sell it today you would lose (191.00) from holding Ashford Hospitality Trust or give up 11.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.19%
Values	Daily Returns

Crombie Real Estate  vs.  Ashford Hospitality Trust

Crombie Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crombie Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's primary 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.

Ashford Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashford Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Preferred Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Crombie Real and Ashford Hospitality

The main advantage of trading using opposite Crombie Real and Ashford Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crombie Real 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 Crombie Real Estate 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 Transaction History module to view history of all your transactions and understand their impact on performance.