Correlation Between Pebblebrook Hotel and Braemar Hotel

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

Diversification Opportunities for Pebblebrook Hotel and Braemar Hotel

0.66

Correlation Coefficient

Pebblebrook Hotel  Braemar Hotel

Poor diversification

The 3 months correlation between Pebblebrook and Braemar is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Braemar Hotel Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Braemar Hotel Resorts 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 Braemar Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Braemar Hotel Resorts has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Braemar Hotel go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and Braemar Hotel

Considering the 90-day investment horizon Pebblebrook Hotel Trust is expected to under-perform the Braemar Hotel. But the stock apears to be less risky and, when comparing its historical volatility, Pebblebrook Hotel Trust is 1.58 times less risky than Braemar Hotel. The stock trades about -0.18 of its potential returns per unit of risk. The Braemar Hotel Resorts is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  348.00  in Braemar Hotel Resorts on December 4, 2024 and sell it today you would lose (44.00) from holding Braemar Hotel Resorts or give up 12.64% of portfolio value over 90 days.

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

Pebblebrook Hotel Trust  vs.  Braemar Hotel Resorts

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 sluggish performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Braemar Hotel Resorts

Risk-Adjusted Performance

Very Weak

Over the last 90 days Braemar Hotel Resorts has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unfluctuating performance, the Stock's technical indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Pebblebrook Hotel and Braemar Hotel

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

The idea behind Pebblebrook Hotel Trust and Braemar Hotel Resorts 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.