Correlation Between Aitken Spence and Browns Beach

Can any of the company-specific risk be diversified away by investing in both Aitken Spence and Browns Beach 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 Aitken Spence and Browns Beach into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aitken Spence Hotel and Browns Beach Hotels, you can compare the effects of market volatilities on Aitken Spence and Browns Beach 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 Aitken Spence with a short position of Browns Beach. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aitken Spence and Browns Beach.

Diversification Opportunities for Aitken Spence and Browns Beach

0.94

Correlation Coefficient

Aitken Spence  Browns Beach

Almost no diversification

The 3 months correlation between Aitken and Browns is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Aitken Spence Hotel and Browns Beach Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Browns Beach Hotels and Aitken Spence 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 Aitken Spence Hotel are associated (or correlated) with Browns Beach. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Browns Beach Hotels has no effect on the direction of Aitken Spence i.e., Aitken Spence and Browns Beach go up and down completely randomly.

Pair Corralation between Aitken Spence and Browns Beach

Assuming the 90 days trading horizon Aitken Spence is expected to generate 1.39 times less return on investment than Browns Beach. But when comparing it to its historical volatility, Aitken Spence Hotel is 1.58 times less risky than Browns Beach. It trades about 0.23 of its potential returns per unit of risk. Browns Beach Hotels is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,300  in Browns Beach Hotels on September 15, 2024 and sell it today you would earn a total of  550.00  from holding Browns Beach Hotels or generate 42.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.33%
Values	Daily Returns

Aitken Spence Hotel  vs.  Browns Beach Hotels

Aitken Spence Hotel

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Aitken Spence Hotel are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Aitken Spence sustained solid returns over the last few months and may actually be approaching a breakup point.

Browns Beach Hotels

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Browns Beach Hotels are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Browns Beach sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aitken Spence and Browns Beach

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

The idea behind Aitken Spence Hotel and Browns Beach 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.