Correlation Between Air Lease and Pebblebrook Hotel

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

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

Diversification Opportunities for Air Lease and Pebblebrook Hotel

0.38

Correlation Coefficient

Air Lease  Pebblebrook Hotel

Weak diversification

The 3 months correlation between Air and Pebblebrook is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Air Lease 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 Air Lease 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 Air Lease 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 Air Lease i.e., Air Lease and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Air Lease and Pebblebrook Hotel

Assuming the 90 days trading horizon Air Lease is expected to generate 0.94 times more return on investment than Pebblebrook Hotel. However, Air Lease is 1.07 times less risky than Pebblebrook Hotel. It trades about -0.05 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about -0.23 per unit of risk. If you would invest  4,618  in Air Lease on December 22, 2024 and sell it today you would lose (298.00) from holding Air Lease or give up 6.45% of portfolio value over 90 days.

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

Air Lease  vs.  Pebblebrook Hotel Trust

Air Lease

Risk-Adjusted Performance

Very Weak

Over the last 90 days Air Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, Air Lease is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pebblebrook Hotel Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Air Lease and Pebblebrook Hotel

The main advantage of trading using opposite Air Lease and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Air Lease 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 Air Lease 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.