Correlation Between Pebblebrook Hotel and Service Properties

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

Diversification Opportunities for Pebblebrook Hotel and Service Properties

-0.17

Correlation Coefficient

Pebblebrook Hotel  Service Properties

Good diversification

The 3 months correlation between Pebblebrook and Service is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Service Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Service Properties 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 Service Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Service Properties Trust has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Service Properties go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and Service Properties

Considering the 90-day investment horizon Pebblebrook Hotel Trust is expected to generate 0.58 times more return on investment than Service Properties. However, Pebblebrook Hotel Trust is 1.71 times less risky than Service Properties. It trades about 0.03 of its potential returns per unit of risk. Service Properties Trust is currently generating about -0.15 per unit of risk. If you would invest  1,297  in Pebblebrook Hotel Trust on September 21, 2024 and sell it today you would earn a total of  58.00  from holding Pebblebrook Hotel Trust or generate 4.47% return on investment over 90 days.

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

Pebblebrook Hotel Trust  vs.  Service Properties Trust

Pebblebrook Hotel Trust

Risk-Adjusted Performance

0 of 100

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 somewhat strong technical and fundamental indicators, Pebblebrook Hotel is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

Service Properties Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Service Properties Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Pebblebrook Hotel and Service Properties

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

The idea behind Pebblebrook Hotel Trust and Service Properties 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.