Correlation Between BRAEMAR HOTELS and Warner Music

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

Diversification Opportunities for BRAEMAR HOTELS and Warner Music

0.65

Correlation Coefficient

BRAEMAR HOTELS  Warner Music

Poor diversification

The 3 months correlation between BRAEMAR and Warner is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding BRAEMAR HOTELS RES and Warner Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Warner Music Group 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 Warner Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Warner Music Group has no effect on the direction of BRAEMAR HOTELS i.e., BRAEMAR HOTELS and Warner Music go up and down completely randomly.

Pair Corralation between BRAEMAR HOTELS and Warner Music

Assuming the 90 days horizon BRAEMAR HOTELS RES is expected to generate 2.24 times more return on investment than Warner Music. However, BRAEMAR HOTELS is 2.24 times more volatile than Warner Music Group. It trades about 0.02 of its potential returns per unit of risk. Warner Music Group is currently generating about 0.04 per unit of risk. If you would invest  289.00  in BRAEMAR HOTELS RES on October 8, 2024 and sell it today you would earn a total of  1.00  from holding BRAEMAR HOTELS RES or generate 0.35% return on investment over 90 days.

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

BRAEMAR HOTELS RES  vs.  Warner Music Group

BRAEMAR HOTELS RES

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BRAEMAR HOTELS RES are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BRAEMAR HOTELS reported solid returns over the last few months and may actually be approaching a breakup point.

Warner Music Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Warner Music Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Warner Music may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BRAEMAR HOTELS and Warner Music

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

The idea behind BRAEMAR HOTELS RES and Warner Music Group 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.