Correlation Between Host Hotels and Pebblebrook Hotel

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

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

Diversification Opportunities for Host Hotels and Pebblebrook Hotel

0.91

Correlation Coefficient

Host Hotels  Pebblebrook Hotel

Almost no diversification

The 3 months correlation between Host and Pebblebrook is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Host Hotels Resorts 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 Host Hotels 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 Host Hotels Resorts 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 Host Hotels i.e., Host Hotels and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Host Hotels and Pebblebrook Hotel

Considering the 90-day investment horizon Host Hotels Resorts is expected to generate 0.65 times more return on investment than Pebblebrook Hotel. However, Host Hotels Resorts is 1.54 times less risky than Pebblebrook Hotel. It trades about 0.07 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.03 per unit of risk. If you would invest  1,690  in Host Hotels Resorts on September 21, 2024 and sell it today you would earn a total of  130.00  from holding Host Hotels Resorts or generate 7.69% return on investment over 90 days.

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

Host Hotels Resorts  vs.  Pebblebrook Hotel Trust

Host Hotels Resorts

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Host Hotels Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Host Hotels is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pebblebrook Hotel Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, Pebblebrook Hotel is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Host Hotels and Pebblebrook Hotel

The main advantage of trading using opposite Host Hotels and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Host Hotels 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 Host Hotels Resorts 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.