Correlation Between BJs Restaurants and Pebblebrook Hotel

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

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

Diversification Opportunities for BJs Restaurants and Pebblebrook Hotel

0.53

Correlation Coefficient

BJs Restaurants  Pebblebrook Hotel

Very weak diversification

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

Pair Corralation between BJs Restaurants and Pebblebrook Hotel

Assuming the 90 days trading horizon BJs Restaurants is expected to generate 1.24 times more return on investment than Pebblebrook Hotel. However, BJs Restaurants is 1.24 times more volatile than Pebblebrook Hotel Trust. It trades about 0.03 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.01 per unit of risk. If you would invest  2,620  in BJs Restaurants on September 26, 2024 and sell it today you would earn a total of  720.00  from holding BJs Restaurants or generate 27.48% return on investment over 90 days.

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

BJs Restaurants  vs.  Pebblebrook Hotel Trust

BJs Restaurants

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Restaurants are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, BJs Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Pebblebrook Hotel may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with BJs Restaurants and Pebblebrook Hotel

The main advantage of trading using opposite BJs Restaurants and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BJs Restaurants 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 BJs Restaurants 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.