Correlation Between Dow Jones and ASHFORD HOSPITTRUST

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

By analyzing existing cross correlation between Dow Jones Industrial and ASHFORD HOSPITTRUST, you can compare the effects of market volatilities on Dow Jones and ASHFORD HOSPITTRUST 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 Dow Jones with a short position of ASHFORD HOSPITTRUST. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and ASHFORD HOSPITTRUST.

Diversification Opportunities for Dow Jones and ASHFORD HOSPITTRUST

-0.72

Correlation Coefficient

Dow Jones  ASHFORD HOSPITTRUST

Pay attention - limited upside

The 3 months correlation between Dow and ASHFORD is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and ASHFORD HOSPITTRUST in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASHFORD HOSPITTRUST and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with ASHFORD HOSPITTRUST. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASHFORD HOSPITTRUST has no effect on the direction of Dow Jones i.e., Dow Jones and ASHFORD HOSPITTRUST go up and down completely randomly.

Pair Corralation between Dow Jones and ASHFORD HOSPITTRUST

Assuming the 90 days trading horizon Dow Jones Industrial is expected to generate 0.21 times more return on investment than ASHFORD HOSPITTRUST. However, Dow Jones Industrial is 4.78 times less risky than ASHFORD HOSPITTRUST. It trades about 0.2 of its potential returns per unit of risk. ASHFORD HOSPITTRUST is currently generating about -0.18 per unit of risk. If you would invest  4,093,693  in Dow Jones Industrial on September 3, 2024 and sell it today you would earn a total of  397,372  from holding Dow Jones Industrial or generate 9.71% return on investment over 90 days.

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

Dow Jones Industrial  vs.  ASHFORD HOSPITTRUST

Pair Trading with Dow Jones and ASHFORD HOSPITTRUST

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

The idea behind Dow Jones Industrial and ASHFORD HOSPITTRUST 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..