Correlation Between Sotherly Hotels and BRAEMAR HOTELS

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

By analyzing existing cross correlation between Sotherly Hotels and BRAEMAR HOTELS RES, you can compare the effects of market volatilities on Sotherly Hotels and BRAEMAR HOTELS 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 Sotherly Hotels with a short position of BRAEMAR HOTELS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sotherly Hotels and BRAEMAR HOTELS.

Diversification Opportunities for Sotherly Hotels and BRAEMAR HOTELS

0.78

Correlation Coefficient

Sotherly Hotels  BRAEMAR HOTELS

Poor diversification

The 3 months correlation between Sotherly and BRAEMAR is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels and BRAEMAR HOTELS RES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRAEMAR HOTELS RES and Sotherly 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 Sotherly Hotels are associated (or correlated) with BRAEMAR HOTELS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRAEMAR HOTELS RES has no effect on the direction of Sotherly Hotels i.e., Sotherly Hotels and BRAEMAR HOTELS go up and down completely randomly.

Pair Corralation between Sotherly Hotels and BRAEMAR HOTELS

Assuming the 90 days horizon Sotherly Hotels is expected to generate 0.94 times more return on investment than BRAEMAR HOTELS. However, Sotherly Hotels is 1.06 times less risky than BRAEMAR HOTELS. It trades about -0.06 of its potential returns per unit of risk. BRAEMAR HOTELS RES is currently generating about -0.1 per unit of risk. If you would invest  85.00  in Sotherly Hotels on November 28, 2024 and sell it today you would lose (9.00) from holding Sotherly Hotels or give up 10.59% of portfolio value over 90 days.

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

Sotherly Hotels  vs.  BRAEMAR HOTELS RES

Sotherly Hotels

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sotherly Hotels has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BRAEMAR HOTELS RES

Risk-Adjusted Performance

Very Weak

Over the last 90 days BRAEMAR HOTELS RES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Sotherly Hotels and BRAEMAR HOTELS

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

The idea behind Sotherly Hotels and BRAEMAR HOTELS RES 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..