Correlation Between Aspen Digital and Braemar Hotels

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

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

Diversification Opportunities for Aspen Digital and Braemar Hotels

-0.27

Correlation Coefficient

Aspen Digital  Braemar Hotels

Very good diversification

The 3 months correlation between Aspen and Braemar is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Aspen Digital 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 Aspen Digital 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 Aspen Digital 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 Aspen Digital i.e., Aspen Digital and Braemar Hotels go up and down completely randomly.

Pair Corralation between Aspen Digital and Braemar Hotels

Given the investment horizon of 90 days Aspen Digital is expected to under-perform the Braemar Hotels. But the pink sheet apears to be less risky and, when comparing its historical volatility, Aspen Digital is 1.35 times less risky than Braemar Hotels. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Braemar Hotels Resorts is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,386  in Braemar Hotels Resorts on December 30, 2024 and sell it today you would earn a total of  23.00  from holding Braemar Hotels Resorts or generate 1.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.88%
Values	Daily Returns

Aspen Digital  vs.  Braemar Hotels Resorts

Aspen Digital

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aspen Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Braemar Hotels Resorts

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotels Resorts are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Braemar Hotels is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aspen Digital and Braemar Hotels

The main advantage of trading using opposite Aspen Digital and Braemar Hotels positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aspen Digital 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 Aspen Digital 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.