Correlation Between Ashford Hospitality and Chimera Investment

Can any of the company-specific risk be diversified away by investing in both Ashford Hospitality and Chimera Investment 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 Chimera Investment 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 Chimera Investment, you can compare the effects of market volatilities on Ashford Hospitality and Chimera Investment 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 Chimera Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ashford Hospitality and Chimera Investment.

Diversification Opportunities for Ashford Hospitality and Chimera Investment

0.63

Correlation Coefficient

Ashford Hospitality  Chimera Investment

Poor diversification

The 3 months correlation between Ashford and Chimera is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Chimera Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chimera Investment 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 Chimera Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chimera Investment has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Chimera Investment go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Chimera Investment

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the Chimera Investment. In addition to that, Ashford Hospitality is 9.58 times more volatile than Chimera Investment. It trades about -0.07 of its total potential returns per unit of risk. Chimera Investment is currently generating about 0.01 per unit of volatility. If you would invest  2,535  in Chimera Investment on September 13, 2024 and sell it today you would earn a total of  3.00  from holding Chimera Investment or generate 0.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Ashford Hospitality Trust  vs.  Chimera Investment

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 fragile 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.

Chimera Investment

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chimera Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Chimera Investment is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ashford Hospitality and Chimera Investment

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

The idea behind Ashford Hospitality Trust and Chimera Investment 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.

Check out your portfolio center.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.