Correlation Between Beazer Homes and Pebblebrook Hotel
Can any of the company-specific risk be diversified away by investing in both Beazer Homes 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 Beazer Homes and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Beazer Homes USA and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on Beazer Homes 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 Beazer Homes with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beazer Homes and Pebblebrook Hotel.
Diversification Opportunities for Beazer Homes and Pebblebrook Hotel
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Beazer and Pebblebrook is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Beazer Homes USA 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 Beazer Homes 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 Beazer Homes USA 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 Beazer Homes i.e., Beazer Homes and Pebblebrook Hotel go up and down completely randomly.
Pair Corralation between Beazer Homes and Pebblebrook Hotel
Assuming the 90 days trading horizon Beazer Homes USA is expected to generate 1.61 times more return on investment than Pebblebrook Hotel. However, Beazer Homes is 1.61 times more volatile than Pebblebrook Hotel Trust. It trades about 0.16 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.2 per unit of risk. If you would invest 2,840 in Beazer Homes USA on August 31, 2024 and sell it today you would earn a total of 440.00 from holding Beazer Homes USA or generate 15.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Beazer Homes USA vs. Pebblebrook Hotel Trust
Performance |
| Timeline |
| Beazer Homes USA |
| Pebblebrook Hotel Trust |
Beazer Homes and Pebblebrook Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Beazer Homes and Pebblebrook Hotel
The main advantage of trading using opposite Beazer Homes and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Beazer Homes 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.| Beazer Homes vs. Big 5 Sporting | Beazer Homes vs. SALESFORCE INC CDR | Beazer Homes vs. RETAIL FOOD GROUP | Beazer Homes vs. SCIENCE IN SPORT |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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