Correlation Between Braemar Hotels and Smart REIT

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

Diversification Opportunities for Braemar Hotels and Smart REIT

0.35

Correlation Coefficient

Braemar Hotels  Smart REIT

Weak diversification

The 3 months correlation between Braemar and Smart is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Braemar Hotels Resorts and Smart REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smart 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 Smart REIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smart REIT has no effect on the direction of Braemar Hotels i.e., Braemar Hotels and Smart REIT go up and down completely randomly.

Pair Corralation between Braemar Hotels and Smart REIT

Assuming the 90 days trading horizon Braemar Hotels Resorts is expected to generate 0.87 times more return on investment than Smart REIT. However, Braemar Hotels Resorts is 1.15 times less risky than Smart REIT. It trades about 0.18 of its potential returns per unit of risk. Smart REIT is currently generating about 0.02 per unit of risk. If you would invest  1,843  in Braemar Hotels Resorts on December 23, 2024 and sell it today you would earn a total of  231.00  from holding Braemar Hotels Resorts or generate 12.53% return on investment over 90 days.

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

Braemar Hotels Resorts  vs.  Smart REIT

Braemar Hotels Resorts

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotels Resorts are ranked lower than 13 (%) 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.

Smart REIT

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Smart REIT are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Smart 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 Smart REIT

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

The idea behind Braemar Hotels Resorts and Smart 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.

Check out your portfolio center.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.