Correlation Between Braemar Hotels and Slate Office

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

Diversification Opportunities for Braemar Hotels and Slate Office

0.58

Correlation Coefficient

Braemar Hotels  Slate Office

Very weak diversification

The 3 months correlation between Braemar and Slate is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Braemar Hotels Resorts and Slate Office REIT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Slate Office 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 Slate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Slate Office REIT has no effect on the direction of Braemar Hotels i.e., Braemar Hotels and Slate Office go up and down completely randomly.

Pair Corralation between Braemar Hotels and Slate Office

Assuming the 90 days trading horizon Braemar Hotels Resorts is expected to generate 0.41 times more return on investment than Slate Office. However, Braemar Hotels Resorts is 2.43 times less risky than Slate Office. It trades about 0.01 of its potential returns per unit of risk. Slate Office REIT is currently generating about -0.05 per unit of risk. If you would invest  1,961  in Braemar Hotels Resorts on September 16, 2024 and sell it today you would lose (90.00) from holding Braemar Hotels Resorts or give up 4.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	90.08%
Values	Daily Returns

Braemar Hotels Resorts  vs.  Slate Office REIT

Braemar Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Braemar Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Braemar Hotels is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Slate Office REIT

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Slate Office REIT are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent basic indicators, Slate Office reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braemar Hotels and Slate Office

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

The idea behind Braemar Hotels Resorts and Slate Office 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.