Correlation Between Automatic Data and Pebblebrook Hotel

Can any of the company-specific risk be diversified away by investing in both Automatic Data 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 Automatic Data and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Automatic Data Processing and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on Automatic Data 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 Automatic Data with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Automatic Data and Pebblebrook Hotel.

Diversification Opportunities for Automatic Data and Pebblebrook Hotel

0.52

Correlation Coefficient

Automatic Data  Pebblebrook Hotel

Very weak diversification

The 3 months correlation between Automatic and Pebblebrook is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Automatic Data Processing 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 Automatic Data 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 Automatic Data Processing 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 Automatic Data i.e., Automatic Data and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Automatic Data and Pebblebrook Hotel

Assuming the 90 days horizon Automatic Data Processing is expected to generate 0.55 times more return on investment than Pebblebrook Hotel. However, Automatic Data Processing is 1.82 times less risky than Pebblebrook Hotel. It trades about 0.14 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  22,931  in Automatic Data Processing on September 23, 2024 and sell it today you would earn a total of  5,284  from holding Automatic Data Processing or generate 23.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Automatic Data Processing  vs.  Pebblebrook Hotel Trust

Automatic Data Processing

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Automatic Data Processing are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Automatic Data reported solid returns over the last few months and may actually be approaching a breakup point.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Pebblebrook Hotel is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Automatic Data and Pebblebrook Hotel

The main advantage of trading using opposite Automatic Data and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Automatic Data 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.

The idea behind Automatic Data Processing and Pebblebrook Hotel Trust 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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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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.