Correlation Between Braemar Hotels and First Real

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

Diversification Opportunities for Braemar Hotels and First Real

0.37

Correlation Coefficient

Braemar Hotels  First Real

Weak diversification

The 3 months correlation between Braemar and First is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Braemar Hotels Resorts and First Real Estate in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Real Estate 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 First Real. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Real Estate has no effect on the direction of Braemar Hotels i.e., Braemar Hotels and First Real go up and down completely randomly.

Pair Corralation between Braemar Hotels and First Real

Assuming the 90 days trading horizon Braemar Hotels Resorts is expected to generate 0.6 times more return on investment than First Real. However, Braemar Hotels Resorts is 1.67 times less risky than First Real. It trades about 0.06 of its potential returns per unit of risk. First Real Estate is currently generating about -0.01 per unit of risk. If you would invest  1,298  in Braemar Hotels Resorts on September 14, 2024 and sell it today you would earn a total of  87.00  from holding Braemar Hotels Resorts or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Braemar Hotels Resorts  vs.  First Real Estate

Braemar Hotels Resorts

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotels Resorts are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Braemar Hotels may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Real Estate

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Real Estate has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, First Real is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Braemar Hotels and First Real

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

The idea behind Braemar Hotels Resorts and First Real Estate 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.