Correlation Between Brandywine Realty and Chatham Lodging

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

By analyzing existing cross correlation between Brandywine Realty Trust and Chatham Lodging Trust, you can compare the effects of market volatilities on Brandywine Realty and Chatham Lodging 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 Brandywine Realty with a short position of Chatham Lodging. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brandywine Realty and Chatham Lodging.

Diversification Opportunities for Brandywine Realty and Chatham Lodging

-0.7

Correlation Coefficient

Brandywine Realty  Chatham Lodging

Excellent diversification

The 3 months correlation between Brandywine and Chatham is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Brandywine Realty Trust and Chatham Lodging Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chatham Lodging Trust and Brandywine Realty 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 Brandywine Realty Trust are associated (or correlated) with Chatham Lodging. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chatham Lodging Trust has no effect on the direction of Brandywine Realty i.e., Brandywine Realty and Chatham Lodging go up and down completely randomly.

Pair Corralation between Brandywine Realty and Chatham Lodging

Considering the 90-day investment horizon Brandywine Realty Trust is expected to generate 1.55 times more return on investment than Chatham Lodging. However, Brandywine Realty is 1.55 times more volatile than Chatham Lodging Trust. It trades about 0.1 of its potential returns per unit of risk. Chatham Lodging Trust is currently generating about -0.37 per unit of risk. If you would invest  447.00  in Brandywine Realty Trust on February 26, 2024 and sell it today you would earn a total of  15.00  from holding Brandywine Realty Trust or generate 3.36% return on investment over 90 days.

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

Brandywine Realty Trust  vs.  Chatham Lodging Trust

Brandywine Realty Trust

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Brandywine Realty Trust are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Brandywine Realty displayed solid returns over the last few months and may actually be approaching a breakup point.

Chatham Lodging Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chatham Lodging Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Brandywine Realty and Chatham Lodging

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

The idea behind Brandywine Realty Trust and Chatham Lodging 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.