Correlation Between Ashford Hospitality and Alibaba Group

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

Diversification Opportunities for Ashford Hospitality and Alibaba Group

-0.58

Correlation Coefficient

Ashford Hospitality  Alibaba Group

Excellent diversification

The 3 months correlation between Ashford and Alibaba is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Alibaba Group Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alibaba Group Holding 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 Alibaba Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alibaba Group Holding has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Alibaba Group go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Alibaba Group

Considering the 90-day investment horizon Ashford Hospitality is expected to generate 1.02 times less return on investment than Alibaba Group. In addition to that, Ashford Hospitality is 1.34 times more volatile than Alibaba Group Holding. It trades about 0.03 of its total potential returns per unit of risk. Alibaba Group Holding is currently generating about 0.04 per unit of volatility. If you would invest  988.00  in Alibaba Group Holding on September 3, 2024 and sell it today you would earn a total of  57.00  from holding Alibaba Group Holding or generate 5.77% return on investment over 90 days.

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

Ashford Hospitality Trust  vs.  Alibaba Group Holding

Ashford Hospitality Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical indicators, Ashford Hospitality unveiled solid returns over the last few months and may actually be approaching a breakup point.

Alibaba Group Holding

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alibaba Group Holding are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Alibaba Group reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ashford Hospitality and Alibaba Group

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

The idea behind Ashford Hospitality Trust and Alibaba Group Holding 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.