Correlation Between Braemar Hotels and American Hotel
Can any of the company-specific risk be diversified away by investing in both Braemar Hotels and American Hotel 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 Braemar Hotels and American Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Braemar Hotels Resorts and American Hotel Income, you can compare the effects of market volatilities on Braemar Hotels and American Hotel 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 Braemar Hotels with a short position of American Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Braemar Hotels and American Hotel.
Diversification Opportunities for Braemar Hotels and American Hotel
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Braemar and American is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Braemar Hotels Resorts and American Hotel Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Hotel Income and Braemar Hotels 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 Braemar Hotels Resorts are associated (or correlated) with American Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Hotel Income has no effect on the direction of Braemar Hotels i.e., Braemar Hotels and American Hotel go up and down completely randomly.
Pair Corralation between Braemar Hotels and American Hotel
Assuming the 90 days trading horizon Braemar Hotels Resorts is expected to generate 0.35 times more return on investment than American Hotel. However, Braemar Hotels Resorts is 2.84 times less risky than American Hotel. It trades about 0.13 of its potential returns per unit of risk. American Hotel Income is currently generating about -0.3 per unit of risk. If you would invest 2,075 in Braemar Hotels Resorts on September 1, 2024 and sell it today you would earn a total of 73.00 from holding Braemar Hotels Resorts or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Braemar Hotels Resorts vs. American Hotel Income
Performance |
| Timeline |
| Braemar Hotels Resorts |
| American Hotel Income |
Braemar Hotels and American Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Braemar Hotels and American Hotel
The main advantage of trading using opposite Braemar Hotels and American Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Braemar Hotels position performs unexpectedly, American Hotel 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 American Hotel will offset losses from the drop in American Hotel's long position.| Braemar Hotels vs. Ashford Hospitality Trust | Braemar Hotels vs. Ashford Hospitality Trust | Braemar Hotels vs. Braemar Hotels Resorts | Braemar Hotels vs. Ashford Hospitality Trust |
| American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Ashford Hospitality Trust | American Hotel vs. Braemar Hotels Resorts | American Hotel vs. Braemar Hotels Resorts |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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