Correlation Between Sotherly Hotels and Pebblebrook Hotel

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

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

Diversification Opportunities for Sotherly Hotels and Pebblebrook Hotel

-0.53

Correlation Coefficient

Sotherly Hotels  Pebblebrook Hotel

Excellent diversification

The 3 months correlation between Sotherly and Pebblebrook is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sotherly Hotels 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 Sotherly Hotels 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 Sotherly Hotels 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 Sotherly Hotels i.e., Sotherly Hotels and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Sotherly Hotels and Pebblebrook Hotel

Given the investment horizon of 90 days Sotherly Hotels is expected to generate 1.91 times less return on investment than Pebblebrook Hotel. In addition to that, Sotherly Hotels is 1.04 times more volatile than Pebblebrook Hotel Trust. It trades about 0.1 of its total potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.2 per unit of volatility. If you would invest  1,237  in Pebblebrook Hotel Trust on September 21, 2024 and sell it today you would earn a total of  134.50  from holding Pebblebrook Hotel Trust or generate 10.87% return on investment over 90 days.

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

Sotherly Hotels  vs.  Pebblebrook Hotel Trust

Sotherly Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sotherly Hotels 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 technical indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Sotherly Hotels and Pebblebrook Hotel

The main advantage of trading using opposite Sotherly Hotels and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sotherly Hotels 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 Sotherly Hotels 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.

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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.