Correlation Between BRAEMAR HOTELS and KB HOME

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

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

Diversification Opportunities for BRAEMAR HOTELS and KB HOME

-0.5

Correlation Coefficient

BRAEMAR HOTELS  KB HOME

Very good diversification

The 3 months correlation between BRAEMAR and KBH is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding BRAEMAR HOTELS RES and KB HOME in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KB HOME 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 RES are associated (or correlated) with KB HOME. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KB HOME has no effect on the direction of BRAEMAR HOTELS i.e., BRAEMAR HOTELS and KB HOME go up and down completely randomly.

Pair Corralation between BRAEMAR HOTELS and KB HOME

Assuming the 90 days horizon BRAEMAR HOTELS is expected to generate 1.14 times less return on investment than KB HOME. In addition to that, BRAEMAR HOTELS is 2.33 times more volatile than KB HOME. It trades about 0.04 of its total potential returns per unit of risk. KB HOME is currently generating about 0.11 per unit of volatility. If you would invest  4,722  in KB HOME on February 1, 2024 and sell it today you would earn a total of  1,328  from holding KB HOME or generate 28.12% return on investment over 90 days.

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

BRAEMAR HOTELS RES  vs.  KB HOME

BRAEMAR HOTELS RES

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BRAEMAR HOTELS RES are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BRAEMAR HOTELS reported solid returns over the last few months and may actually be approaching a breakup point.

KB HOME

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KB HOME are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, KB HOME may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with BRAEMAR HOTELS and KB HOME

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

The idea behind BRAEMAR HOTELS RES and KB HOME 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.