Correlation Between Hua Hong and BRAEMAR HOTELS

Can any of the company-specific risk be diversified away by investing in both Hua Hong 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 Hua Hong and BRAEMAR HOTELS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hua Hong Semiconductor and BRAEMAR HOTELS RES, you can compare the effects of market volatilities on Hua Hong 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 Hua Hong with a short position of BRAEMAR HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hua Hong and BRAEMAR HOTELS.

Diversification Opportunities for Hua Hong and BRAEMAR HOTELS

-0.32

Correlation Coefficient

Hua Hong  BRAEMAR HOTELS

Very good diversification

The 3 months correlation between Hua and BRAEMAR is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Hua Hong Semiconductor 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 Hua Hong 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 Hua Hong Semiconductor 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 Hua Hong i.e., Hua Hong and BRAEMAR HOTELS go up and down completely randomly.

Pair Corralation between Hua Hong and BRAEMAR HOTELS

Assuming the 90 days horizon Hua Hong Semiconductor is expected to generate 1.59 times more return on investment than BRAEMAR HOTELS. However, Hua Hong is 1.59 times more volatile than BRAEMAR HOTELS RES. It trades about 0.23 of its potential returns per unit of risk. BRAEMAR HOTELS RES is currently generating about -0.04 per unit of risk. If you would invest  254.00  in Hua Hong Semiconductor on December 19, 2024 and sell it today you would earn a total of  202.00  from holding Hua Hong Semiconductor or generate 79.53% return on investment over 90 days.

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

Hua Hong Semiconductor  vs.  BRAEMAR HOTELS RES

Hua Hong Semiconductor

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hua Hong Semiconductor are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hua Hong reported solid returns over the last few months and may actually be approaching a breakup point.

BRAEMAR HOTELS RES

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRAEMAR HOTELS RES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Hua Hong and BRAEMAR HOTELS

The main advantage of trading using opposite Hua Hong and BRAEMAR HOTELS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hua Hong 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 Hua Hong Semiconductor 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.