Correlation Between Pebblebrook Hotel and MACOM Technology

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

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

Diversification Opportunities for Pebblebrook Hotel and MACOM Technology

0.91

Correlation Coefficient

Pebblebrook Hotel  MACOM Technology

Almost no diversification

The 3 months correlation between Pebblebrook and MACOM is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and MACOM Technology Solutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MACOM Technology Sol and Pebblebrook 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 Pebblebrook Hotel Trust are associated (or correlated) with MACOM Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MACOM Technology Sol has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and MACOM Technology go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and MACOM Technology

Assuming the 90 days trading horizon Pebblebrook Hotel Trust is expected to under-perform the MACOM Technology. But the stock apears to be less risky and, when comparing its historical volatility, Pebblebrook Hotel Trust is 1.59 times less risky than MACOM Technology. The stock trades about -0.25 of its potential returns per unit of risk. The MACOM Technology Solutions is currently generating about -0.12 of returns per unit of risk over similar time horizon. If you would invest  12,700  in MACOM Technology Solutions on December 24, 2024 and sell it today you would lose (2,900) from holding MACOM Technology Solutions or give up 22.83% of portfolio value over 90 days.

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

Pebblebrook Hotel Trust  vs.  MACOM Technology Solutions

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 uncertain 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.

MACOM Technology Sol

Risk-Adjusted Performance

Very Weak

Over the last 90 days MACOM Technology Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Pebblebrook Hotel and MACOM Technology

The main advantage of trading using opposite Pebblebrook Hotel and MACOM Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pebblebrook Hotel position performs unexpectedly, MACOM Technology 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 MACOM Technology will offset losses from the drop in MACOM Technology's long position.

The idea behind Pebblebrook Hotel Trust and MACOM Technology Solutions 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.