Correlation Between PepsiCo and Pebblebrook Hotel

Can any of the company-specific risk be diversified away by investing in both PepsiCo and Pebblebrook 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 PepsiCo and Pebblebrook Hotel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PepsiCo and Pebblebrook Hotel Trust, you can compare the effects of market volatilities on PepsiCo and Pebblebrook 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 PepsiCo with a short position of Pebblebrook Hotel. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Pebblebrook Hotel.

Diversification Opportunities for PepsiCo and Pebblebrook Hotel

-0.45

Correlation Coefficient

PepsiCo  Pebblebrook Hotel

Very good diversification

The 3 months correlation between PepsiCo and Pebblebrook is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Pebblebrook Hotel Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pebblebrook Hotel Trust and PepsiCo 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 PepsiCo are associated (or correlated) with Pebblebrook Hotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pebblebrook Hotel Trust has no effect on the direction of PepsiCo i.e., PepsiCo and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between PepsiCo and Pebblebrook Hotel

Assuming the 90 days trading horizon PepsiCo is expected to under-perform the Pebblebrook Hotel. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.18 times less risky than Pebblebrook Hotel. The stock trades about 0.0 of its potential returns per unit of risk. The Pebblebrook Hotel Trust is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1,312  in Pebblebrook Hotel Trust on October 11, 2024 and sell it today you would lose (42.00) from holding Pebblebrook Hotel Trust or give up 3.2% of portfolio value over 90 days.

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

PepsiCo  vs.  Pebblebrook Hotel Trust

PepsiCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

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.

Pair Trading with PepsiCo and Pebblebrook Hotel

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

The idea behind PepsiCo and Pebblebrook Hotel 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.