Correlation Between Selective Insurance and Pebblebrook Hotel

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

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

Diversification Opportunities for Selective Insurance and Pebblebrook Hotel

0.49

Correlation Coefficient

Selective Insurance  Pebblebrook Hotel

Very weak diversification

The 3 months correlation between Selective and Pebblebrook is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Selective Insurance Group 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 Selective Insurance 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 Selective Insurance Group 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 Selective Insurance i.e., Selective Insurance and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Selective Insurance and Pebblebrook Hotel

Assuming the 90 days horizon Selective Insurance Group is expected to generate 1.8 times more return on investment than Pebblebrook Hotel. However, Selective Insurance is 1.8 times more volatile than Pebblebrook Hotel Trust. It trades about 0.01 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about -0.24 per unit of risk. If you would invest  8,610  in Selective Insurance Group on December 30, 2024 and sell it today you would lose (60.00) from holding Selective Insurance Group or give up 0.7% of portfolio value over 90 days.

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

Selective Insurance Group  vs.  Pebblebrook Hotel Trust

Selective Insurance

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Selective Insurance Group are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Selective Insurance is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Selective Insurance and Pebblebrook Hotel

The main advantage of trading using opposite Selective Insurance and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Selective Insurance 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 Selective Insurance Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.