Correlation Between BRAEMAR HOTELS and Sotherly Hotels

Can any of the company-specific risk be diversified away by investing in both BRAEMAR HOTELS 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 BRAEMAR HOTELS and Sotherly Hotels 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 Sotherly Hotels, you can compare the effects of market volatilities on BRAEMAR HOTELS 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 BRAEMAR HOTELS with a short position of Sotherly Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRAEMAR HOTELS and Sotherly Hotels.

Diversification Opportunities for BRAEMAR HOTELS and Sotherly Hotels

0.34

Correlation Coefficient

BRAEMAR HOTELS  Sotherly Hotels

Weak diversification

The 3 months correlation between BRAEMAR and Sotherly is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding BRAEMAR HOTELS RES and Sotherly Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sotherly Hotels 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 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 BRAEMAR HOTELS i.e., BRAEMAR HOTELS and Sotherly Hotels go up and down completely randomly.

Pair Corralation between BRAEMAR HOTELS and Sotherly Hotels

Assuming the 90 days horizon BRAEMAR HOTELS RES is expected to generate 1.27 times more return on investment than Sotherly Hotels. However, BRAEMAR HOTELS is 1.27 times more volatile than Sotherly Hotels. It trades about -0.07 of its potential returns per unit of risk. Sotherly Hotels is currently generating about -0.22 per unit of risk. If you would invest  295.00  in BRAEMAR HOTELS RES on December 30, 2024 and sell it today you would lose (47.00) from holding BRAEMAR HOTELS RES or give up 15.93% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

BRAEMAR HOTELS RES  vs.  Sotherly Hotels

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 uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Sotherly Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with BRAEMAR HOTELS and Sotherly Hotels

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

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.