Correlation Between Braemar Hotel and Service Properties

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

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

Diversification Opportunities for Braemar Hotel and Service Properties

-0.4

Correlation Coefficient

Braemar Hotel  Service Properties

Very good diversification

The 3 months correlation between Braemar and Service is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Braemar Hotel Resorts and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties Trust and Braemar Hotel 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 Hotel Resorts are associated (or correlated) with Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Braemar Hotel i.e., Braemar Hotel and Service Properties go up and down completely randomly.

Pair Corralation between Braemar Hotel and Service Properties

Considering the 90-day investment horizon Braemar Hotel Resorts is expected to under-perform the Service Properties. But the stock apears to be less risky and, when comparing its historical volatility, Braemar Hotel Resorts is 1.49 times less risky than Service Properties. The stock trades about -0.08 of its potential returns per unit of risk. The Service Properties Trust is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  244.00  in Service Properties Trust on December 28, 2024 and sell it today you would earn a total of  19.00  from holding Service Properties Trust or generate 7.79% return on investment over 90 days.

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

Braemar Hotel Resorts  vs.  Service Properties Trust

Braemar Hotel Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Braemar Hotel Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's technical indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Service Properties Trust

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Service Properties Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Service Properties exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Braemar Hotel and Service Properties

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

The idea behind Braemar Hotel Resorts and Service Properties Trust 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 Transaction History module to view history of all your transactions and understand their impact on performance.