Correlation Between Diamondrock Hospitality and Pebblebrook Hotel
Can any of the company-specific risk be diversified away by investing in both Diamondrock Hospitality 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 Diamondrock Hospitality and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Diamondrock Hospitality and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on Diamondrock Hospitality 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 Diamondrock Hospitality with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diamondrock Hospitality and Pebblebrook Hotel.
Diversification Opportunities for Diamondrock Hospitality and Pebblebrook Hotel
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Diamondrock and Pebblebrook is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Diamondrock Hospitality 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 Diamondrock Hospitality 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 Diamondrock Hospitality 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 Diamondrock Hospitality i.e., Diamondrock Hospitality and Pebblebrook Hotel go up and down completely randomly.
Pair Corralation between Diamondrock Hospitality and Pebblebrook Hotel
Considering the 90-day investment horizon Diamondrock Hospitality is expected to generate 0.73 times more return on investment than Pebblebrook Hotel. However, Diamondrock Hospitality is 1.37 times less risky than Pebblebrook Hotel. It trades about 0.03 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.02 per unit of risk. If you would invest 837.00 in Diamondrock Hospitality on August 27, 2024 and sell it today you would earn a total of 79.00 from holding Diamondrock Hospitality or generate 9.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Diamondrock Hospitality vs. Pebblebrook Hotel Trust
Performance |
| Timeline |
| Diamondrock Hospitality |
| Pebblebrook Hotel Trust |
Diamondrock Hospitality and Pebblebrook Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Diamondrock Hospitality and Pebblebrook Hotel
The main advantage of trading using opposite Diamondrock Hospitality and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Diamondrock Hospitality 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.| Diamondrock Hospitality vs. Ryman Hospitality Properties | Diamondrock Hospitality vs. Service Properties Trust |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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