Correlation Between Braemar Hotels and Riocan REIT

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

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

Diversification Opportunities for Braemar Hotels and Riocan REIT

0.32

Correlation Coefficient

Braemar Hotels  Riocan REIT

Weak diversification

The 3 months correlation between Braemar and Riocan is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Braemar Hotels Resorts and Riocan REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Riocan REIT 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 Resorts are associated (or correlated) with Riocan REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Riocan REIT has no effect on the direction of Braemar Hotels i.e., Braemar Hotels and Riocan REIT go up and down completely randomly.

Pair Corralation between Braemar Hotels and Riocan REIT

Assuming the 90 days trading horizon Braemar Hotels Resorts is expected to under-perform the Riocan REIT. In addition to that, Braemar Hotels is 1.15 times more volatile than Riocan REIT. It trades about -0.01 of its total potential returns per unit of risk. Riocan REIT is currently generating about 0.01 per unit of volatility. If you would invest  1,322  in Riocan REIT on December 3, 2024 and sell it today you would earn a total of  5.00  from holding Riocan REIT or generate 0.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Braemar Hotels Resorts  vs.  Riocan REIT

Braemar Hotels Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Braemar Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Riocan REIT

Risk-Adjusted Performance

Very Weak

Over the last 90 days Riocan REIT has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Riocan REIT is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Braemar Hotels and Riocan REIT

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

The idea behind Braemar Hotels Resorts and Riocan REIT 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..