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

0.34

Correlation Coefficient

Pebblebrook Hotel  Carsales

Weak diversification

The 3 months correlation between Pebblebrook and Carsales is 0.34. 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 Trust is expected to under-perform the Carsales. In addition to that, Pebblebrook Hotel is 1.54 times more volatile than CarsalesCom. It trades about -0.24 of its total potential returns per unit of risk. CarsalesCom is currently generating about -0.1 per unit of volatility. If you would invest  2,360  in CarsalesCom on October 11, 2024 and sell it today you would lose (60.00) from holding CarsalesCom or give up 2.54% of portfolio value 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

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

CarsalesCom

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CarsalesCom are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Carsales is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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' 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.