Correlation Between New Residential and Pebblebrook Hotel
Can any of the company-specific risk be diversified away by investing in both New Residential and Pebblebrook 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 New Residential and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New Residential Investment and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on New Residential and Pebblebrook 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 New Residential with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of New Residential and Pebblebrook Hotel.
Diversification Opportunities for New Residential and Pebblebrook Hotel
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between New and Pebblebrook is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding New Residential Investment and Pebblebrook Hotel Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pebblebrook Hotel Trust and New Residential 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 New Residential Investment are associated (or correlated) with Pebblebrook Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pebblebrook Hotel Trust has no effect on the direction of New Residential i.e., New Residential and Pebblebrook Hotel go up and down completely randomly.
Pair Corralation between New Residential and Pebblebrook Hotel
Assuming the 90 days trading horizon New Residential is expected to generate 1.99 times less return on investment than Pebblebrook Hotel. But when comparing it to its historical volatility, New Residential Investment is 2.69 times less risky than Pebblebrook Hotel. It trades about 0.36 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 1,090 in Pebblebrook Hotel Trust on September 1, 2024 and sell it today you would earn a total of 190.00 from holding Pebblebrook Hotel Trust or generate 17.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New Residential Investment vs. Pebblebrook Hotel Trust
Performance |
| Timeline |
| New Residential Inve |
| Pebblebrook Hotel Trust |
New Residential and Pebblebrook Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New Residential and Pebblebrook Hotel
The main advantage of trading using opposite New Residential and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New Residential position performs unexpectedly, Pebblebrook 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 Pebblebrook Hotel will offset losses from the drop in Pebblebrook Hotel's long position.| New Residential vs. TRAINLINE PLC LS | New Residential vs. Soken Chemical Engineering | New Residential vs. Siamgas And Petrochemicals | New Residential vs. SEKISUI CHEMICAL |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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