Correlation Between Ford and BRAEMAR HOTELS
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and BRAEMAR HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and BRAEMAR HOTELS RES, you can compare the effects of market volatilities on Ford 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 Ford with a short position of BRAEMAR HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and BRAEMAR HOTELS.
Diversification Opportunities for Ford and BRAEMAR HOTELS
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Ford and BRAEMAR is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and BRAEMAR HOTELS RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRAEMAR HOTELS RES and Ford 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 Ford Motor 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 RES has no effect on the direction of Ford i.e., Ford and BRAEMAR HOTELS go up and down completely randomly.
Pair Corralation between Ford and BRAEMAR HOTELS
Taking into account the 90-day investment horizon Ford is expected to generate 2.67 times less return on investment than BRAEMAR HOTELS. But when comparing it to its historical volatility, Ford Motor is 3.42 times less risky than BRAEMAR HOTELS. It trades about 0.23 of its potential returns per unit of risk. BRAEMAR HOTELS RES is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 248.00 in BRAEMAR HOTELS RES on September 1, 2024 and sell it today you would earn a total of 62.00 from holding BRAEMAR HOTELS RES or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ford Motor vs. BRAEMAR HOTELS RES
Performance |
| Timeline |
| Ford Motor |
| BRAEMAR HOTELS RES |
Ford and BRAEMAR HOTELS Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and BRAEMAR HOTELS
The main advantage of trading using opposite Ford and BRAEMAR HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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's long position.The idea behind Ford Motor and BRAEMAR HOTELS RES 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.| BRAEMAR HOTELS vs. Sotherly Hotels | BRAEMAR HOTELS vs. Superior Plus Corp | BRAEMAR HOTELS vs. NMI Holdings | BRAEMAR HOTELS vs. Origin Agritech |
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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