Correlation Between InterContinental and Pebblebrook Hotel

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

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

Diversification Opportunities for InterContinental and Pebblebrook Hotel

0.86

Correlation Coefficient

InterContinental  Pebblebrook Hotel

Very poor diversification

The 3 months correlation between InterContinental and Pebblebrook is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding InterContinental Hotels Group 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 InterContinental 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 InterContinental Hotels Group 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 InterContinental i.e., InterContinental and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between InterContinental and Pebblebrook Hotel

Assuming the 90 days trading horizon InterContinental Hotels Group is expected to generate 0.35 times more return on investment than Pebblebrook Hotel. However, InterContinental Hotels Group is 2.89 times less risky than Pebblebrook Hotel. It trades about -0.25 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about -0.22 per unit of risk. If you would invest  12,100  in InterContinental Hotels Group on October 12, 2024 and sell it today you would lose (400.00) from holding InterContinental Hotels Group or give up 3.31% of portfolio value over 90 days.

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

InterContinental Hotels Group  vs.  Pebblebrook Hotel Trust

InterContinental Hotels

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in InterContinental Hotels Group are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Pebblebrook Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with InterContinental and Pebblebrook Hotel

The main advantage of trading using opposite InterContinental and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InterContinental 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 InterContinental Hotels Group 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.