Correlation Between Ashford Hospitality and Braemar Hotels

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

Diversification Opportunities for Ashford Hospitality and Braemar Hotels

-0.74

Correlation Coefficient

Ashford Hospitality  Braemar Hotels

Pay attention - limited upside

The 3 months correlation between Ashford and Braemar is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust and Braemar Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braemar Hotels Resorts 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 Braemar Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braemar Hotels Resorts has no effect on the direction of Ashford Hospitality i.e., Ashford Hospitality and Braemar Hotels go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Braemar Hotels

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to generate 1.81 times more return on investment than Braemar Hotels. However, Ashford Hospitality is 1.81 times more volatile than Braemar Hotels Resorts. It trades about 0.05 of its potential returns per unit of risk. Braemar Hotels Resorts is currently generating about -0.01 per unit of risk. If you would invest  1,360  in Ashford Hospitality Trust on February 1, 2024 and sell it today you would earn a total of  25.00  from holding Ashford Hospitality Trust or generate 1.84% return on investment over 90 days.

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

Ashford Hospitality Trust  vs.  Braemar Hotels Resorts

Ashford Hospitality Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Ashford Hospitality demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Braemar Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braemar Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Preferred Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Ashford Hospitality and Braemar Hotels

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

The idea behind Ashford Hospitality Trust and Braemar Hotels Resorts 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.