Correlation Between Pebblebrook Hotel and Diamondrock Hospitality
Can any of the company-specific risk be diversified away by investing in both Pebblebrook Hotel and Diamondrock Hospitality 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 Diamondrock Hospitality 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 Diamondrock Hospitality, you can compare the effects of market volatilities on Pebblebrook Hotel and Diamondrock Hospitality 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 Diamondrock Hospitality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pebblebrook Hotel and Diamondrock Hospitality.
Diversification Opportunities for Pebblebrook Hotel and Diamondrock Hospitality
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Pebblebrook and Diamondrock is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Diamondrock Hospitality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diamondrock Hospitality 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 Diamondrock Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diamondrock Hospitality has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Diamondrock Hospitality go up and down completely randomly.
Pair Corralation between Pebblebrook Hotel and Diamondrock Hospitality
Considering the 90-day investment horizon Pebblebrook Hotel is expected to generate 24.17 times less return on investment than Diamondrock Hospitality. In addition to that, Pebblebrook Hotel is 1.29 times more volatile than Diamondrock Hospitality. It trades about 0.0 of its total potential returns per unit of risk. Diamondrock Hospitality is currently generating about 0.02 per unit of volatility. If you would invest 853.00 in Diamondrock Hospitality on August 27, 2024 and sell it today you would earn a total of 63.00 from holding Diamondrock Hospitality or generate 7.39% 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. Diamondrock Hospitality
Performance |
| Timeline |
| Pebblebrook Hotel Trust |
| Diamondrock Hospitality |
Pebblebrook Hotel and Diamondrock Hospitality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pebblebrook Hotel and Diamondrock Hospitality
The main advantage of trading using opposite Pebblebrook Hotel and Diamondrock Hospitality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pebblebrook Hotel position performs unexpectedly, Diamondrock Hospitality 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 Diamondrock Hospitality will offset losses from the drop in Diamondrock Hospitality's long position.The idea behind Pebblebrook Hotel Trust and Diamondrock Hospitality 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.| 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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