Correlation Between Power REIT and Braemar Hotel

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

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

Diversification Opportunities for Power REIT and Braemar Hotel

-0.31

Correlation Coefficient

Power REIT  Braemar Hotel

Very good diversification

The 3 months correlation between Power and Braemar is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Power REIT 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 Power REIT 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 Power REIT 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 Power REIT i.e., Power REIT and Braemar Hotel go up and down completely randomly.

Pair Corralation between Power REIT and Braemar Hotel

Allowing for the 90-day total investment horizon Power REIT is expected to generate 2.7 times more return on investment than Braemar Hotel. However, Power REIT is 2.7 times more volatile than Braemar Hotel Resorts. It trades about 0.01 of its potential returns per unit of risk. Braemar Hotel Resorts is currently generating about 0.02 per unit of risk. If you would invest  522.00  in Power REIT on August 31, 2024 and sell it today you would lose (408.00) from holding Power REIT or give up 78.16% of portfolio value over 90 days.

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

Power REIT  vs.  Braemar Hotel Resorts

Power REIT

Risk-Adjusted Performance

3 of 100

Insignificant

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

Braemar Hotel Resorts

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Braemar Hotel Resorts are ranked lower than 6 (%) 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 Power REIT and Braemar Hotel

The main advantage of trading using opposite Power REIT and Braemar Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power REIT 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 Power REIT 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.

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