Correlation Between Pebblebrook Hotel and NET Power

Can any of the company-specific risk be diversified away by investing in both Pebblebrook Hotel and NET Power 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 NET Power 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 NET Power, you can compare the effects of market volatilities on Pebblebrook Hotel and NET Power 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 NET Power. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pebblebrook Hotel and NET Power.

Diversification Opportunities for Pebblebrook Hotel and NET Power

0.38

Correlation Coefficient

Pebblebrook Hotel  NET Power

Weak diversification

The 3 months correlation between Pebblebrook and NET is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Pebblebrook Hotel Trust and NET Power in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NET Power 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 NET Power. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NET Power has no effect on the direction of Pebblebrook Hotel i.e., Pebblebrook Hotel and NET Power go up and down completely randomly.

Pair Corralation between Pebblebrook Hotel and NET Power

Assuming the 90 days trading horizon Pebblebrook Hotel is expected to generate 8.74 times less return on investment than NET Power. But when comparing it to its historical volatility, Pebblebrook Hotel Trust is 6.84 times less risky than NET Power. It trades about 0.11 of its potential returns per unit of risk. NET Power is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  162.00  in NET Power on May 15, 2025 and sell it today you would earn a total of  124.00  from holding NET Power or generate 76.54% return on investment over 90 days.

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

Pebblebrook Hotel Trust  vs.  NET Power

Pebblebrook Hotel Trust

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile fundamental drivers, Pebblebrook Hotel may actually be approaching a critical reversion point that can send shares even higher in September 2025.

NET Power

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NET Power are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, NET Power reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pebblebrook Hotel and NET Power

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

The idea behind Pebblebrook Hotel Trust and NET Power 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.