Correlation Between Sunstone Hotel and Pebblebrook Hotel
Can any of the company-specific risk be diversified away by investing in both Sunstone Hotel 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 Sunstone Hotel and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunstone Hotel Investors and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on Sunstone Hotel 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 Sunstone Hotel with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunstone Hotel and Pebblebrook Hotel.
Diversification Opportunities for Sunstone Hotel and Pebblebrook Hotel
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Sunstone and Pebblebrook is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Sunstone Hotel Investors 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 Sunstone 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 Sunstone Hotel Investors 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 Sunstone Hotel i.e., Sunstone Hotel and Pebblebrook Hotel go up and down completely randomly.
Pair Corralation between Sunstone Hotel and Pebblebrook Hotel
Assuming the 90 days trading horizon Sunstone Hotel Investors is expected to under-perform the Pebblebrook Hotel. But the preferred stock apears to be less risky and, when comparing its historical volatility, Sunstone Hotel Investors is 2.23 times less risky than Pebblebrook Hotel. The preferred stock trades about -0.15 of its potential returns per unit of risk. The Pebblebrook Hotel Trust is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,265 in Pebblebrook Hotel Trust on August 31, 2024 and sell it today you would earn a total of 120.00 from holding Pebblebrook Hotel Trust or generate 9.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Sunstone Hotel Investors vs. Pebblebrook Hotel Trust
Performance |
| Timeline |
| Sunstone Hotel Investors |
| Pebblebrook Hotel Trust |
Sunstone Hotel and Pebblebrook Hotel Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunstone Hotel and Pebblebrook Hotel
The main advantage of trading using opposite Sunstone Hotel and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunstone Hotel 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.| Sunstone Hotel vs. Pebblebrook Hotel Trust | Sunstone Hotel vs. DiamondRock Hospitality | Sunstone Hotel vs. Pebblebrook Hotel Trust |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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