Correlation Between INDOFOOD AGRI and Pebblebrook Hotel

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

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

Diversification Opportunities for INDOFOOD AGRI and Pebblebrook Hotel

0.38

Correlation Coefficient

INDOFOOD AGRI  Pebblebrook Hotel

Weak diversification

The 3 months correlation between INDOFOOD and Pebblebrook is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding INDOFOOD AGRI RES 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 INDOFOOD AGRI 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 INDOFOOD AGRI RES 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 INDOFOOD AGRI i.e., INDOFOOD AGRI and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between INDOFOOD AGRI and Pebblebrook Hotel

Assuming the 90 days trading horizon INDOFOOD AGRI RES is expected to generate 0.97 times more return on investment than Pebblebrook Hotel. However, INDOFOOD AGRI RES is 1.04 times less risky than Pebblebrook Hotel. It trades about 0.02 of its potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.0 per unit of risk. If you would invest  19.00  in INDOFOOD AGRI RES on October 5, 2024 and sell it today you would earn a total of  2.00  from holding INDOFOOD AGRI RES or generate 10.53% return on investment over 90 days.

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

INDOFOOD AGRI RES  vs.  Pebblebrook Hotel Trust

INDOFOOD AGRI RES

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INDOFOOD AGRI RES has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, INDOFOOD AGRI is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

0 of 100

Insignificant

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 comparatively uncertain basic indicators, Pebblebrook Hotel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INDOFOOD AGRI and Pebblebrook Hotel

The main advantage of trading using opposite INDOFOOD AGRI and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INDOFOOD AGRI 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 INDOFOOD AGRI RES 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.