Correlation Between Ashford Hospitality and Pebblebrook Hotel

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

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

Diversification Opportunities for Ashford Hospitality and Pebblebrook Hotel

-0.31

Correlation Coefficient

Ashford Hospitality  Pebblebrook Hotel

Very good diversification

The 3 months correlation between Ashford and Pebblebrook is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Ashford Hospitality Trust 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 Ashford Hospitality 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 Ashford Hospitality Trust 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 Ashford Hospitality i.e., Ashford Hospitality and Pebblebrook Hotel go up and down completely randomly.

Pair Corralation between Ashford Hospitality and Pebblebrook Hotel

Assuming the 90 days trading horizon Ashford Hospitality Trust is expected to under-perform the Pebblebrook Hotel. In addition to that, Ashford Hospitality is 3.48 times more volatile than Pebblebrook Hotel Trust. It trades about -0.1 of its total potential returns per unit of risk. Pebblebrook Hotel Trust is currently generating about 0.03 per unit of volatility. If you would invest  2,210  in Pebblebrook Hotel Trust on September 12, 2024 and sell it today you would earn a total of  28.00  from holding Pebblebrook Hotel Trust or generate 1.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Ashford Hospitality Trust  vs.  Pebblebrook Hotel Trust

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 fragile performance in the last few months, the Preferred Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pebblebrook Hotel Trust

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pebblebrook Hotel Trust are ranked lower than 2 (%) 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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Ashford Hospitality and Pebblebrook Hotel

The main advantage of trading using opposite Ashford Hospitality and Pebblebrook Hotel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ashford Hospitality 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 Ashford Hospitality Trust 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.