Correlation Between Pebblebrook Hotel and Arch Capital
Can any of the company-specific risk be diversified away by investing in both Pebblebrook Hotel and Arch Capital 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 Pebblebrook Hotel and Arch Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pebblebrook Hotel Trust and Arch Capital Group, you can compare the effects of market volatilities on Pebblebrook Hotel and Arch Capital 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 Pebblebrook Hotel with a short position of Arch Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pebblebrook Hotel and Arch Capital.
Diversification Opportunities for Pebblebrook Hotel and Arch Capital
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pebblebrook and Arch is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Arch Capital Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arch Capital Group and Pebblebrook Hotel 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 Pebblebrook Hotel Trust are associated (or correlated) with Arch Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arch Capital Group has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Arch Capital go up and down completely randomly.
Pair Corralation between Pebblebrook Hotel and Arch Capital
Assuming the 90 days trading horizon Pebblebrook Hotel Trust is expected to generate 1.01 times more return on investment than Arch Capital. However, Pebblebrook Hotel is 1.01 times more volatile than Arch Capital Group. It trades about 0.28 of its potential returns per unit of risk. Arch Capital Group is currently generating about 0.07 per unit of risk. If you would invest 1,090 in Pebblebrook Hotel Trust on September 1, 2024 and sell it today you would earn a total of 200.00 from holding Pebblebrook Hotel Trust or generate 18.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pebblebrook Hotel Trust vs. Arch Capital Group
Performance |
| Timeline |
| Pebblebrook Hotel Trust |
| Arch Capital Group |
Pebblebrook Hotel and Arch Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pebblebrook Hotel and Arch Capital
The main advantage of trading using opposite Pebblebrook Hotel and Arch Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pebblebrook Hotel position performs unexpectedly, Arch Capital 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 Arch Capital will offset losses from the drop in Arch Capital's long position.The idea behind Pebblebrook Hotel Trust and Arch Capital Group 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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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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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