Correlation Between Armada Hoffler and Braemar Hotels

Can any of the company-specific risk be diversified away by investing in both Armada Hoffler 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 Armada Hoffler and Braemar Hotels into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Armada Hoffler Properties and Braemar Hotels Resorts, you can compare the effects of market volatilities on Armada Hoffler 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 Armada Hoffler with a short position of Braemar Hotels. Check out your portfolio center. Please also check ongoing floating volatility patterns of Armada Hoffler and Braemar Hotels.

Diversification Opportunities for Armada Hoffler and Braemar Hotels

-0.14

Correlation Coefficient

Armada Hoffler  Braemar Hotels

Good diversification

The 3 months correlation between Armada and Braemar is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Armada Hoffler Properties and Braemar Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braemar Hotels Resorts and Armada Hoffler 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 Armada Hoffler Properties 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 Resorts has no effect on the direction of Armada Hoffler i.e., Armada Hoffler and Braemar Hotels go up and down completely randomly.

Pair Corralation between Armada Hoffler and Braemar Hotels

Assuming the 90 days trading horizon Armada Hoffler is expected to generate 5.26 times less return on investment than Braemar Hotels. But when comparing it to its historical volatility, Armada Hoffler Properties is 1.1 times less risky than Braemar Hotels. It trades about 0.04 of its potential returns per unit of risk. Braemar Hotels Resorts is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,831  in Braemar Hotels Resorts on December 30, 2024 and sell it today you would earn a total of  259.00  from holding Braemar Hotels Resorts or generate 14.15% return on investment over 90 days.

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

Armada Hoffler Properties  vs.  Braemar Hotels Resorts

Armada Hoffler Properties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Armada Hoffler Properties are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical indicators, Armada Hoffler is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Braemar Hotels Resorts

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotels Resorts are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Braemar Hotels exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Armada Hoffler and Braemar Hotels

The main advantage of trading using opposite Armada Hoffler and Braemar Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Armada Hoffler 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' long position.

The idea behind Armada Hoffler Properties and Braemar Hotels Resorts 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.