Correlation Between Pebblebrook Hotel and Ashford Hospitality

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

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

Diversification Opportunities for Pebblebrook Hotel and Ashford Hospitality

-0.47

Correlation Coefficient

Pebblebrook Hotel  Ashford Hospitality

Very good diversification

The 3 months correlation between Pebblebrook and Ashford is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and Ashford Hospitality Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ashford Hospitality Trust and Pebblebrook Hotel 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 Pebblebrook Hotel Trust are associated (or correlated) with Ashford Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ashford Hospitality Trust has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and Ashford Hospitality go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and Ashford Hospitality

Assuming the 90 days trading horizon Pebblebrook Hotel Trust is expected to under-perform the Ashford Hospitality. But the preferred stock apears to be less risky and, when comparing its historical volatility, Pebblebrook Hotel Trust is 3.47 times less risky than Ashford Hospitality. The preferred stock trades about -0.32 of its potential returns per unit of risk. The Ashford Hospitality Trust is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,441  in Ashford Hospitality Trust on September 1, 2024 and sell it today you would lose (18.00) from holding Ashford Hospitality Trust or give up 1.25% of portfolio value over 90 days.

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

Pebblebrook Hotel Trust  vs.  Ashford Hospitality Trust

Pebblebrook Hotel Trust

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Pebblebrook Hotel is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Ashford Hospitality Trust

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ashford Hospitality Trust has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Preferred Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Pebblebrook Hotel and Ashford Hospitality

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

The idea behind Pebblebrook Hotel Trust and Ashford Hospitality 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..