Correlation Between Pebblebrook Hotel and Ashford Hospitality

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

Diversification Opportunities for Pebblebrook Hotel and Ashford Hospitality

-0.59

Correlation Coefficient

Pebblebrook Hotel  Ashford Hospitality

Excellent diversification

The 3 months correlation between Pebblebrook and Ashford is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Ashford Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashford Hospitality Trust 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 Ashford Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashford Hospitality Trust has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and Ashford Hospitality

Assuming the 90 days trading horizon Pebblebrook Hotel Trust is expected to under-perform the Ashford Hospitality. But the preferred stock apears to be less risky and, when comparing its historical volatility, Pebblebrook Hotel Trust is 3.01 times less risky than Ashford Hospitality. The preferred stock trades about -0.29 of its potential returns per unit of risk. The Ashford Hospitality Trust is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,353  in Ashford Hospitality Trust on November 28, 2024 and sell it today you would earn a total of  229.00  from holding Ashford Hospitality Trust or generate 16.93% return on investment over 90 days.

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

Pebblebrook Hotel Trust  vs.  Ashford Hospitality Trust

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. Despite weak performance in the last few months, the Preferred Stock's fundamental drivers remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Ashford Hospitality Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ashford Hospitality Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Ashford Hospitality demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pebblebrook Hotel and Ashford Hospitality

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

The idea behind Pebblebrook Hotel Trust and Ashford Hospitality Trust 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.