Correlation Between Equinix and Ashford Hospitality

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

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

Diversification Opportunities for Equinix and Ashford Hospitality

-0.6

Correlation Coefficient

Equinix  Ashford Hospitality

Excellent diversification

The 3 months correlation between Equinix and Ashford is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Equinix 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 Equinix 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 Equinix 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 Equinix i.e., Equinix and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Equinix and Ashford Hospitality

Given the investment horizon of 90 days Equinix is expected to generate 0.29 times more return on investment than Ashford Hospitality. However, Equinix is 3.48 times less risky than Ashford Hospitality. It trades about -0.11 of its potential returns per unit of risk. Ashford Hospitality Trust is currently generating about -0.14 per unit of risk. If you would invest  97,826  in Equinix on September 27, 2024 and sell it today you would lose (2,825) from holding Equinix or give up 2.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Equinix  vs.  Ashford Hospitality Trust

Equinix

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 unsteady performance in the last few months, the Preferred Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Equinix and Ashford Hospitality

The main advantage of trading using opposite Equinix and Ashford Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equinix 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 Equinix 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..