Correlation Between Mongolia Growth and Ashford Hospitality

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

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

Diversification Opportunities for Mongolia Growth and Ashford Hospitality

0.23

Correlation Coefficient

Mongolia Growth  Ashford Hospitality

Modest diversification

The 3 months correlation between Mongolia and Ashford is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Mongolia Growth Group 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 Mongolia Growth 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 Mongolia Growth Group 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 Mongolia Growth i.e., Mongolia Growth and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Mongolia Growth and Ashford Hospitality

Assuming the 90 days horizon Mongolia Growth Group is expected to generate 0.66 times more return on investment than Ashford Hospitality. However, Mongolia Growth Group is 1.51 times less risky than Ashford Hospitality. It trades about -0.07 of its potential returns per unit of risk. Ashford Hospitality Trust is currently generating about -0.05 per unit of risk. If you would invest  103.00  in Mongolia Growth Group on September 15, 2024 and sell it today you would lose (10.00) from holding Mongolia Growth Group or give up 9.71% of portfolio value over 90 days.

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

Mongolia Growth Group  vs.  Ashford Hospitality Trust

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 inconsistent 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.

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 latest fragile performance, the Preferred Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Mongolia Growth and Ashford Hospitality

The main advantage of trading using opposite Mongolia Growth and Ashford Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mongolia Growth 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 Mongolia Growth Group 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.