Correlation Between BRT Realty and Sotherly Hotels
Can any of the company-specific risk be diversified away by investing in both BRT Realty and Sotherly 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 BRT Realty and Sotherly Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BRT Realty Trust and Sotherly Hotels, you can compare the effects of market volatilities on BRT Realty and Sotherly 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 BRT Realty with a short position of Sotherly Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRT Realty and Sotherly Hotels.
Diversification Opportunities for BRT Realty and Sotherly Hotels
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BRT and Sotherly is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding BRT Realty Trust and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels and BRT Realty 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 BRT Realty Trust are associated (or correlated) with Sotherly Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sotherly Hotels has no effect on the direction of BRT Realty i.e., BRT Realty and Sotherly Hotels go up and down completely randomly.
Pair Corralation between BRT Realty and Sotherly Hotels
Considering the 90-day investment horizon BRT Realty Trust is expected to generate 0.37 times more return on investment than Sotherly Hotels. However, BRT Realty Trust is 2.73 times less risky than Sotherly Hotels. It trades about 0.37 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.22 per unit of risk. If you would invest 1,668 in BRT Realty Trust on August 27, 2024 and sell it today you would earn a total of 320.00 from holding BRT Realty Trust or generate 19.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BRT Realty Trust vs. Sotherly Hotels
Performance |
| Timeline |
| BRT Realty Trust |
| Sotherly Hotels |
BRT Realty and Sotherly Hotels Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BRT Realty and Sotherly Hotels
The main advantage of trading using opposite BRT Realty and Sotherly Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRT Realty position performs unexpectedly, Sotherly 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 Sotherly Hotels will offset losses from the drop in Sotherly Hotels' long position.The idea behind BRT Realty Trust and Sotherly Hotels 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.| Sotherly Hotels vs. Summit Hotel Properties | Sotherly Hotels vs. Diamondrock Hospitality | Sotherly Hotels vs. RLJ Lodging Trust | Sotherly Hotels vs. Chatham Lodging Trust |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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