Correlation Between BRAEMAR HOTELS and Chesapeake Utilities

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

By analyzing existing cross correlation between BRAEMAR HOTELS RES and Chesapeake Utilities, you can compare the effects of market volatilities on BRAEMAR HOTELS and Chesapeake Utilities 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 Chesapeake Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRAEMAR HOTELS and Chesapeake Utilities.

Diversification Opportunities for BRAEMAR HOTELS and Chesapeake Utilities

-0.21

Correlation Coefficient

BRAEMAR HOTELS  Chesapeake Utilities

Very good diversification

The 3 months correlation between BRAEMAR and Chesapeake is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding BRAEMAR HOTELS RES and Chesapeake Utilities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chesapeake Utilities 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 RES are associated (or correlated) with Chesapeake Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chesapeake Utilities has no effect on the direction of BRAEMAR HOTELS i.e., BRAEMAR HOTELS and Chesapeake Utilities go up and down completely randomly.

Pair Corralation between BRAEMAR HOTELS and Chesapeake Utilities

Assuming the 90 days horizon BRAEMAR HOTELS RES is expected to under-perform the Chesapeake Utilities. In addition to that, BRAEMAR HOTELS is 2.35 times more volatile than Chesapeake Utilities. It trades about -0.05 of its total potential returns per unit of risk. Chesapeake Utilities is currently generating about -0.01 per unit of volatility. If you would invest  11,441  in Chesapeake Utilities on December 24, 2024 and sell it today you would lose (141.00) from holding Chesapeake Utilities or give up 1.23% of portfolio value over 90 days.

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

BRAEMAR HOTELS RES  vs.  Chesapeake Utilities

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.

Chesapeake Utilities

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chesapeake Utilities has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Chesapeake Utilities is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with BRAEMAR HOTELS and Chesapeake Utilities

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

The idea behind BRAEMAR HOTELS RES and Chesapeake Utilities 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.