Correlation Between Warner Music and ASHFORD HOSPITTRUST

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

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

Diversification Opportunities for Warner Music and ASHFORD HOSPITTRUST

-0.56

Correlation Coefficient

Warner Music  ASHFORD HOSPITTRUST

Excellent diversification

The 3 months correlation between Warner and ASHFORD is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding Warner Music Group and ASHFORD HOSPITTRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASHFORD HOSPITTRUST and Warner Music 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 Warner Music 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 Warner Music i.e., Warner Music and ASHFORD HOSPITTRUST go up and down completely randomly.

Pair Corralation between Warner Music and ASHFORD HOSPITTRUST

Assuming the 90 days horizon Warner Music is expected to generate 1.99 times less return on investment than ASHFORD HOSPITTRUST. In addition to that, Warner Music is 2.31 times more volatile than ASHFORD HOSPITTRUST. It trades about 0.02 of its total potential returns per unit of risk. ASHFORD HOSPITTRUST is currently generating about 0.09 per unit of volatility. If you would invest  490.00  in ASHFORD HOSPITTRUST on October 23, 2024 and sell it today you would earn a total of  15.00  from holding ASHFORD HOSPITTRUST or generate 3.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	76.27%
Values	Daily Returns

Warner Music Group  vs.  ASHFORD HOSPITTRUST

Warner Music Group

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Warner Music 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

OK

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

Pair Trading with Warner Music and ASHFORD HOSPITTRUST

The main advantage of trading using opposite Warner Music and ASHFORD HOSPITTRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Warner Music 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 Warner Music 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.