Correlation Between Pebblebrook Hotel and Singapore Airlines

Can any of the company-specific risk be diversified away by investing in both Pebblebrook Hotel and Singapore Airlines 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 Singapore Airlines 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 Singapore Airlines Limited, you can compare the effects of market volatilities on Pebblebrook Hotel and Singapore Airlines 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 Singapore Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pebblebrook Hotel and Singapore Airlines.

Diversification Opportunities for Pebblebrook Hotel and Singapore Airlines

0.37

Correlation Coefficient

Pebblebrook Hotel  Singapore Airlines

Weak diversification

The 3 months correlation between Pebblebrook and Singapore is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Singapore Airlines Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Singapore Airlines 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 Singapore Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Singapore Airlines has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Singapore Airlines go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and Singapore Airlines

Assuming the 90 days trading horizon Pebblebrook Hotel is expected to generate 4.4 times less return on investment than Singapore Airlines. In addition to that, Pebblebrook Hotel is 1.55 times more volatile than Singapore Airlines Limited. It trades about 0.01 of its total potential returns per unit of risk. Singapore Airlines Limited is currently generating about 0.06 per unit of volatility. If you would invest  330.00  in Singapore Airlines Limited on October 5, 2024 and sell it today you would earn a total of  124.00  from holding Singapore Airlines Limited or generate 37.58% return on investment over 90 days.

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

Pebblebrook Hotel Trust  vs.  Singapore Airlines Limited

Pebblebrook Hotel Trust

Risk-Adjusted Performance

0 of 100

Modest

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 comparatively uncertain basic indicators, Pebblebrook Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Singapore Airlines

Risk-Adjusted Performance

0 of 100

Insignificant

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

Pair Trading with Pebblebrook Hotel and Singapore Airlines

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

The idea behind Pebblebrook Hotel Trust and Singapore Airlines Limited 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.