Correlation Between Ashford Hospitality and Mongolia Growth

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

Diversification Opportunities for Ashford Hospitality and Mongolia Growth

0.26

Correlation Coefficient

Ashford Hospitality  Mongolia Growth

Modest diversification

The 3 months correlation between Ashford and Mongolia is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Mongolia Growth Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mongolia Growth Group 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 Mongolia Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mongolia Growth Group has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Mongolia Growth go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Mongolia Growth

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the Mongolia Growth. In addition to that, Ashford Hospitality is 1.63 times more volatile than Mongolia Growth Group. It trades about -0.08 of its total potential returns per unit of risk. Mongolia Growth Group is currently generating about -0.07 per unit of volatility. If you would invest  106.00  in Mongolia Growth Group on September 12, 2024 and sell it today you would lose (10.00) from holding Mongolia Growth Group or give up 9.43% of portfolio value over 90 days.

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

Ashford Hospitality Trust  vs.  Mongolia Growth Group

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.

Mongolia Growth Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mongolia Growth Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Ashford Hospitality and Mongolia Growth

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

The idea behind Ashford Hospitality Trust and Mongolia Growth Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.