Correlation Between Fortescue Metals and ASHFORD HOSPITTRUST

Can any of the company-specific risk be diversified away by investing in both Fortescue Metals and ASHFORD HOSPITTRUST 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 Fortescue Metals and ASHFORD HOSPITTRUST into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fortescue Metals Group and ASHFORD HOSPITTRUST, you can compare the effects of market volatilities on Fortescue Metals and ASHFORD HOSPITTRUST 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 Fortescue Metals with a short position of ASHFORD HOSPITTRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortescue Metals and ASHFORD HOSPITTRUST.

Diversification Opportunities for Fortescue Metals and ASHFORD HOSPITTRUST

0.62

Correlation Coefficient

Fortescue Metals  ASHFORD HOSPITTRUST

Poor diversification

The 3 months correlation between Fortescue and ASHFORD is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Fortescue Metals Group and ASHFORD HOSPITTRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASHFORD HOSPITTRUST and Fortescue Metals 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 Fortescue Metals Group are associated (or correlated) with ASHFORD HOSPITTRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASHFORD HOSPITTRUST has no effect on the direction of Fortescue Metals i.e., Fortescue Metals and ASHFORD HOSPITTRUST go up and down completely randomly.

Pair Corralation between Fortescue Metals and ASHFORD HOSPITTRUST

Assuming the 90 days horizon Fortescue Metals Group is expected to generate 0.46 times more return on investment than ASHFORD HOSPITTRUST. However, Fortescue Metals Group is 2.19 times less risky than ASHFORD HOSPITTRUST. It trades about 0.02 of its potential returns per unit of risk. ASHFORD HOSPITTRUST is currently generating about -0.09 per unit of risk. If you would invest  1,077  in Fortescue Metals Group on October 24, 2024 and sell it today you would earn a total of  83.00  from holding Fortescue Metals Group or generate 7.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	97.0%
Values	Daily Returns

Fortescue Metals Group  vs.  ASHFORD HOSPITTRUST

Fortescue Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fortescue Metals Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fortescue Metals is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ASHFORD HOSPITTRUST

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days ASHFORD HOSPITTRUST has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ASHFORD HOSPITTRUST may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Fortescue Metals and ASHFORD HOSPITTRUST

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

The idea behind Fortescue Metals Group and ASHFORD HOSPITTRUST 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.