Correlation Between Ashford Hospitality and Aspen Digital

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

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

Diversification Opportunities for Ashford Hospitality and Aspen Digital

-0.47

Correlation Coefficient

Ashford Hospitality  Aspen Digital

Very good diversification

The 3 months correlation between Ashford and Aspen is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Aspen Digital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aspen Digital and Ashford Hospitality 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 Ashford Hospitality Trust are associated (or correlated) with Aspen Digital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aspen Digital has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Aspen Digital go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Aspen Digital

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 13.13 times more return on investment than Aspen Digital. However, Ashford Hospitality is 13.13 times more volatile than Aspen Digital. It trades about 0.01 of its potential returns per unit of risk. Aspen Digital is currently generating about 0.06 per unit of risk. If you would invest  1,515  in Ashford Hospitality Trust on August 10, 2024 and sell it today you would lose (35.00) from holding Ashford Hospitality Trust or give up 2.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ashford Hospitality Trust  vs.  Aspen Digital

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 fairly strong basic indicators, Ashford Hospitality is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Aspen Digital

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aspen Digital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Aspen Digital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Ashford Hospitality and Aspen Digital

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

The idea behind Ashford Hospitality Trust and Aspen Digital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.