Correlation Between Equinix and Braemar Hotel

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

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

Diversification Opportunities for Equinix and Braemar Hotel

0.69

Correlation Coefficient

Equinix  Braemar Hotel

Poor diversification

The 3 months correlation between Equinix and Braemar is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Equinix and Braemar Hotel Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braemar Hotel Resorts and Equinix 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 Equinix are associated (or correlated) with Braemar Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braemar Hotel Resorts has no effect on the direction of Equinix i.e., Equinix and Braemar Hotel go up and down completely randomly.

Pair Corralation between Equinix and Braemar Hotel

Given the investment horizon of 90 days Equinix is expected to generate 1.26 times less return on investment than Braemar Hotel. But when comparing it to its historical volatility, Equinix is 2.58 times less risky than Braemar Hotel. It trades about 0.05 of its potential returns per unit of risk. Braemar Hotel Resorts is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  338.00  in Braemar Hotel Resorts on September 12, 2024 and sell it today you would earn a total of  11.00  from holding Braemar Hotel Resorts or generate 3.25% return on investment over 90 days.

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

Equinix  vs.  Braemar Hotel Resorts

Equinix

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Equinix are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Equinix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Braemar Hotel Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotel Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical indicators, Braemar Hotel reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equinix and Braemar Hotel

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

The idea behind Equinix and Braemar Hotel 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.

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 Money Managers module to screen money managers from public funds and ETFs managed around the world.