Correlation Between Pebblebrook Hotel and Walmart

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

Diversification Opportunities for Pebblebrook Hotel and Walmart

0.91

Correlation Coefficient

Pebblebrook Hotel  Walmart

Almost no diversification

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

Pair Corralation between Pebblebrook Hotel and Walmart

Assuming the 90 days trading horizon Pebblebrook Hotel Trust is expected to under-perform the Walmart. In addition to that, Pebblebrook Hotel is 1.89 times more volatile than Walmart. It trades about 0.0 of its total potential returns per unit of risk. Walmart is currently generating about 0.13 per unit of volatility. If you would invest  4,272  in Walmart on October 24, 2024 and sell it today you would earn a total of  4,593  from holding Walmart or generate 107.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Pebblebrook Hotel Trust  vs.  Walmart

Pebblebrook Hotel Trust

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Pebblebrook Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Walmart

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Walmart reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pebblebrook Hotel and Walmart

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

The idea behind Pebblebrook Hotel Trust and Walmart 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.