Correlation Between Pebblebrook Hotel and CARSALES

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

Diversification Opportunities for Pebblebrook Hotel and CARSALES

0.29

Correlation Coefficient

Pebblebrook Hotel  CARSALES

Modest diversification

The 3 months correlation between Pebblebrook and CARSALES is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and CARSALESCOM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CARSALESCOM 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 CARSALES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CARSALESCOM has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and CARSALES go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and CARSALES

Assuming the 90 days trading horizon Pebblebrook Hotel is expected to generate 4.24 times less return on investment than CARSALES. In addition to that, Pebblebrook Hotel is 1.37 times more volatile than CARSALESCOM. It trades about 0.01 of its total potential returns per unit of risk. CARSALESCOM is currently generating about 0.07 per unit of volatility. If you would invest  1,329  in CARSALESCOM on October 4, 2024 and sell it today you would earn a total of  851.00  from holding CARSALESCOM or generate 64.03% 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.  CARSALESCOM

Pebblebrook Hotel Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Pebblebrook Hotel may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CARSALESCOM

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARSALESCOM has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, CARSALES is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Pebblebrook Hotel and CARSALES

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

The idea behind Pebblebrook Hotel Trust and CARSALESCOM 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.