Correlation Between Carsales and ASHFORD HOSPITTRUST

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

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

Diversification Opportunities for Carsales and ASHFORD HOSPITTRUST

-0.35

Correlation Coefficient

Carsales  ASHFORD HOSPITTRUST

Very good diversification

The 3 months correlation between Carsales and ASHFORD is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding CarsalesCom and ASHFORD HOSPITTRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASHFORD HOSPITTRUST and Carsales 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 CarsalesCom 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 Carsales i.e., Carsales and ASHFORD HOSPITTRUST go up and down completely randomly.

Pair Corralation between Carsales and ASHFORD HOSPITTRUST

Assuming the 90 days horizon CarsalesCom is expected to generate 0.62 times more return on investment than ASHFORD HOSPITTRUST. However, CarsalesCom is 1.61 times less risky than ASHFORD HOSPITTRUST. It trades about -0.05 of its potential returns per unit of risk. ASHFORD HOSPITTRUST is currently generating about -0.15 per unit of risk. If you would invest  2,260  in CarsalesCom on October 6, 2024 and sell it today you would lose (100.00) from holding CarsalesCom or give up 4.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

CarsalesCom  vs.  ASHFORD HOSPITTRUST

CarsalesCom

Risk-Adjusted Performance

0 of 100

Very Weak

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

ASHFORD HOSPITTRUST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ASHFORD HOSPITTRUST has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Carsales and ASHFORD HOSPITTRUST

The main advantage of trading using opposite Carsales and ASHFORD HOSPITTRUST positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carsales 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 CarsalesCom 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.